Layoffs Hit Tech Sector With Force as Amazon, Lyft Warn of Economic Downturn

The outlook for tech industry jobs worsened on Thursday, with ride-hailing company Lyft Inc.

LYFT -2.00%

and payments company Stripe Inc. both announcing major layoffs and Amazon.com Inc.

AMZN -3.06%

Saying it will freeze corporate hiring for months.

The spate of big news for the industry came as the Federal Reserve moved again to raise interest rates to combat inflation, signaling a greater risk that the U.S. Faced with the possibility, tech company executives warn of tougher times ahead.

Also Read :  The Fed Minutes May Deliver A Massive Blow To The Stock Market

“We are facing an unusual macroeconomic environment, and want to balance our hiring and investments with being thoughtful about the economy,” Beth Galetti, senior vice president of people experience and technology at Amazon, said in a memo to employees this week. The memo notified them of Amazon’s plan to pause hiring across its corporate workforce, which includes employees in high-profile teams such as Prime Video and Grocery.

Also Read :  Qatar minister slams hypocrisy of people calling for World Cup boycott

After years of unprecedented growth and record profits, many of the world’s largest technology companies are paying back as shopping patterns changed after the pandemic and businesses had to examine spending on everything from advertising to investments. In some cases, the effort to adjust payrolls has come at companies that have already fallen behind.

Also Read :  Many savers are missing out on the chance of better financial returns by leaving their nest eggs in a bank

US it. Applications for unemployment benefits fell this fall from a summer peak and held steady at a low level last week. On Friday, the Labor Department’s October employment report will be released, with the latest snapshot of the general labor market.

As markets react to inflation and high interest rates, technology stocks are off to their worst start to a year on record. WSJ’s Hardika Singh explains why the sector—from tech giants to small startups—has been hit so hard. (June 21, 2022) Illustration: Jacob Reynolds

While companies have cited the broader economic climate, the hiring freezes, layoffs and cost-cutting — which have not hit some industries with as much force — underscore how the tech sector may have overshot the way the pandemic brought prosperity to the sector.

“Negative productivity can be hidden when everything is great,” said Mark Stoeckle, chief executive of investment firm Adams Funds. “It’s easier to protect your margins when revenues are up, but when they’re stopping or going slower, you have to look at where you’re spending your money.”

For tech companies that have only seen growth for years, the decrease in head count is anathema to company culture and will be difficult to implement, Mr. Stoeckle said.

Amazon’s hiring pause added to a string of similar news announced by other tech companies.

Lyft co-founders John Zimmer and Logan Green said Thursday that the company will cut 13% of its workforce, or nearly 700 jobs, the Wall Street Journal reported earlier Thursday. In a memo, the founders highlighted the potential recession and said they expect the insurance costs of the ride-share to increase. Lyft has more than 5,000 employees not including drivers. The company laid off about 60 people in July and previously announced that it plans to slow hiring and reduce budgets in several departments.

John Zimmer, co-founder of Lyft, at WSJ Tech Live in Laguna Beach, Calif., last month.


Photo:

Nikki Richer for the Wall Street Journal

Stripe on Thursday also outlined layoffs that will target 14% of staff. In a note to employees, Chief Executive Patrick Collison cited “severe inflation, energy shocks, higher interest rates, reduced investment budgets and spare startup funding.”

Also on Thursday, Dapper Labs, which creates non-fungible tokens from content in the National Basketball Association and the National Football League, said it was laying off 22% of its staff. Cryptocurrency-exchange operator Coinbase Global Inc.

This summer let go of 18% of its staff, and trading company Robinhood Markets Inc.

Cut 9%.

Tech companies are facing many challenges. Facebook parent Meta Platforms Inc. has planned to cut expenses by at least 10%, partly through staff reductions, as its sales have fallen and executives have struggled to turn the social media company around to its new focus on the metaverse and virtual reality. Alphabet Inc

Google has required some employees to apply for new jobs to stay in the company, and Apple Inc.

Executives said they are hiring in a “deliberate” way.

At Twitter Inc., meanwhile, Elon Musk’s ownership has unleashed a wave of changes that have included departures of top executives and plans for extensive layoffs. Employees at the company and people familiar with the matter have estimated that up to 50% of the 7,500 staff could be cut. The proposed layoffs are expected to reduce engineering positions as well as affect other areas in the company.

The downward trends have happened even as major companies have tried previous measures to cut costs this year. In Amazon’s case, the company scaled back plans for warehouse openings this year and froze hiring last month in its core retail division. Lyft is also currently reducing its workforce after earlier adjustments.

Amazon’s pause on hiring will not extend to its hourly workers because the company has aggressively hired in recent months to prepare for the busy holiday season.

Amazon scaled back plans for warehouse openings this year and froze hiring last month in its core retail division.


Photo:

Sean Rayford/Getty Images

Amazon has warned that it is taking a cautious approach during the current economic climate. Brian Olsavsky, Amazon’s chief financial officer, said last week that company executives saw signs that consumers were tightening their budgets and that inflation remained high.

The company’s shares have tumbled since it signaled in a quarterly earnings report a week ago that its projected sales for the fourth quarter could be far below expectations. The company said it anticipated operating income of anywhere between zero and $4 billion for what is Amazon’s most important sales period of the year.

Amazon’s top leaders have warned of worsening economic conditions. CEO Andy Jassy last week said that the company would have to balance its investments. The announcement followed a recent tweet from Jeff Bezos, in which the Amazon founder said it was time to “blow down the hatch.”

Write to Sebastian Herrera at [email protected] and Preetika Rana at [email protected]

Copyright ©2022 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Source

Leave a Reply

Your email address will not be published. Required fields are marked *

Related Articles

Back to top button