Layoffs hit the tech sector as hard as Amazon, Lyft warns of economic downturn

The outlook for tech industry jobs worsened Thursday, with passenger carrier

Lift a company

LYFT -2.00%

and Stripe Inc.

Amazon.com a company

AMZN -3.06%

Saying it would freeze hiring companies for months.

The outpouring of dismal news for the industry came as the Fed moved again to raise interest rates To combat inflation, signaling greater risks that the US economy is sliding into recession. Faced with this prospect, tech company executives are warning of troubled times ahead.

“We are facing an extraordinary macroeconomic environment, and we want to balance our employment and investments with thinking about this economy,” Beth Galletti, Amazon’s senior vice president of people and technology experience, said in a note to employees this week. The memo notified them of Amazon’s plan to stop hiring across the company’s workforce, which includes employees on high-profile teams such as Prime Video and Grocery.

After years of unprecedented growth and record profits, many of the world’s largest tech companies are in decline as shopping patterns change after the pandemic, and companies have been forced to consider spending on everything from advertising to investments. In some cases, efforts have come to adjust payroll at companies that have already fallen behind.

US applications for unemployment benefits It fell this fall from the height of summer and settled at a low level last week. The Department of Labor’s employment report for October will be released on Friday, and provides the latest glimpse into the labor market in general.

As markets respond to inflation and rising interest rates, tech stocks are off to their worst start to a year ever. 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, hiring freezes, layoffs and cost cuts — which have not impacted some industries as hard — underscore how the tech sector can weather as the pandemic has brought prosperity to the sector.

“Negative productivity can be hidden when everything is going well,” said Mark Stoekel, CEO of investment firm Adams Funds. “It’s easier to protect your margins when revenue is going up, but when it stops or goes up slower, you have to look at where you’re spending your money.”

For tech companies that only experienced growth years ago, downsizing is anathema to the company’s culture and will be difficult to implement, Stoekel said.

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

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

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


picture:

Nikki Richer for The Wall Street Journal

Stripe on Thursday also outlined layoffs that will target 14% of employees. In a note to employees, CEO Patrick Collison noted “stubborn inflation, energy shocks, high interest rates, low investment budgets, and scant startup funding.”

Also Thursday, Dapper Labs, which creates non-perishable 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 a company

This summer gave up 18% of its employees and trading company

Robinhood Markets a company

Cut off 9%.

Technology companies face myriad challenges.

Facebook

Meta Platforms Inc. the mother Plan to cut costs by at least 10%, in part through staff cuts, as its sales have fallen and executives have struggled to shift the social media company to its new focus on virtual reality and metaverse.

the alphabet a company

Google has asked some employees to apply for new jobs to stay at the company, and

apple a company

The executives said they were hiring in an “intentional” manner.

Twitter Inc. , In the meantime ,

Elon MuskProperty ushered in wave of changes That included the departure of senior executives and plans for large-scale layoffs. Employees at the company and people familiar with the matter have estimated that up to 50% of the 7,500 employees could be laid off. The proposed layoffs are expected to reduce engineering jobs as well as affect other areas of the company.

The downward trends occurred even as major companies tried earlier cost-cutting measures this year. In the case of Amazon, the company Shrink warehouse slot plans This year recruitment was frozen last month in the primary retail division. Lyft is now also reducing its workforce again after previous adjustments.

Amazon’s stop hiring won’t extend to its hourly workers as the company I’ve hired you hard The last months to prepare for the busy holiday season.

Amazon scaled back plans to open warehouses this year and froze hiring last month in its core retail division.


picture:

Sean Rayford / Getty Images

Amazon 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 have seen signs that consumers are tightening their budgets and that inflation remains high.

The company’s shares have since fallen Referred to in the quarterly earnings report A week ago that its expected sales for the fourth quarter may be well below expectations. The company said it expects operating income anywhere between zero and $4 billion for Amazon’s most important sales period of the year.

Amazon’s top leaders have warned of worsening economic conditions. CEO Andy Gacy said last week that the company would have to balance its investments. This message was followed by a recent tweet by

Jeff Bezos

What the founder of Amazon said It’s time to “plug the holes.”

Write to Sebastian Herrera at sebastian.herrera@wsj.com and Preetika Rana at preetika.rana@wsj.com

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