- In recent months, dozens of companies have laid off a substantial number of employees to cut costs
- Since November 1, big names like Stripe, Twitter, Salesforce and Meta have announced their own layoffs
- Surging layoffs are linked to the tech sector overshooting its growth potential in 2021, as well as Fed rate hikes
- Meanwhile, the banking sector has restarted its trend of annually pruning underperforming employees and segments
- Investors can navigate these layoffs with trend-correcting tools like Q.ai’s artificial intelligence and Portfolio Protection
Big-name layoffs have cropped up repeatedly throughout 2022. But if it feels like more and more tech and financial firms are gearing up for massive reductions, you’re not crazy – it’s happening.
Between April and May 2022, the number of tech-based companies laying off workers more than doubled, while the number of laid off workers quadrupled. Since then, only September has seen the number of newly laid off tech employees fall below 10,000.
Though we’re only 1/3 of the way through the month, November has seen some of the largest layoffs thus far. While a “mere” 62 companies have said goodbye to workers, over 23,000 tech employees have lost their jobs this month. Meta, Salesforce, Stripe and Twitter employees have all seen widespread layoffs in the last two weeks alone.
Unfortunately, they’re unlikely to be the last.
Lyft was one of the first big names to announce layoffs in the first week of November. The rideshare giant reportedly plans to shed 13% of its staff (not including contracted drivers), amounting to nearly 700 workers. That marks Lyft’s second (and larger) round of layoffs this year after letting go of some 60 workers in July.
In an internal memo, Lyft cofounders John Zimmer and Logan Green blamed broader economic challenges for the company’s decision. Included among these are “a probable recession” and rising insurance costs.
“We are not immune to the realities of inflation and a slowing economy,” the note reads. It adds that the company “worked hard to bring down costs” first through hiring and growth freezes. “Still, Lyft has to become leaner, which requires us to part with incredible team members.”
Lyft plans to spend between $27 and $32 million in restructuring and employee severance and benefits costs in the move. The company promises 10 weeks of pay, extended healthcare coverage, accelerated equity vesting and recruiting assistance to laid off workers.
Shares of Lyft are down nearly 75% in 2022.
On November 3, Stripe CEO Patrick Collison emailed employees announcing that 14% of the company’s workforce would be cut. That’s equivalent to around 1,120 employees.
Collison blamed broader macroeconomic trends for its decision, including “stubborn inflation, energy shocks, higher interest rates, reduced investment budgets and sparser startup funding.” The CEO also admitted that Stripe “overhired” and “underestimated both the likelihood and impact of a broader slowdown.”
Stripe plans to pay 14 weeks of severance and either healthcare benefits or cash premiums to all departing employees. It will also pay out PTO and 2022 bonuses.
Despite announcing intentions to go public this year, Stripe is not currently a publicly traded company. The payments processor was valued at $95 billion in 2021, though its 2022 valuation reportedly declined to $74 billion in July.
It’s no secret that Elon Musk’s Twitter takeover hasn’t exactly gone smoothly.
The buyout – which required a lawsuit to complete – was immediately plagued by concerns around reduced moderation, fleeing advertisers (and their accompanying dollars) and threats of putting the entire platform behind a paywall. As a result of this hodgepodge of a mess, Twitter has reportedly been losing $4 million a day.
But that wasn’t the end of it. On November 3, just a week after the takeover, media outlets reported that Musk planned to cut half of Twitter’s 7,500-strong staff. (Musk had previously indicated that as many of 75% of staffers could lose their positions.)
Some of these positions, such as Twitter’s former CEO, CFO, head of legal policy and safety, and chief marketing officer were outright fired. More recently, Twitter’s top privacy, security and compliance officers resigned. In-between, some departments have seen their headcounts slashed up to 80%.
So far, over 3,700 employees have faced Twitter’s brutal layoffs. However, the company has reportedly asked dozens of employees to return to work due to their importance to critical operations.
Twitter has been delisted following Elon Musk’s takeover.
Barclays layoffs aren’t nearly as extensive or high-profile, with some 200 cuts accounting for less than 3% of its investment banking and trading desk headcount.
And yet, the London-based British bank’s cuts may be more worrying, suggesting that the need to slash expenses has bled beyond the tech sector. While investment banks enjoyed an overabundance of deals in 2021, the number of corporate buyouts and new listings have plunged dramatically amid higher volatility and economic uncertainty.
Barclays layoffs come just two weeks after it announced a 45% drop from M&A advisory fees. The bank blamed this move on (what else?) macroeconomic factors and decreased investment and merger activities.
Barclays stock is down over 29% year-to-date.
Salesforce reportedly laid off hundreds of employees this week in a continuation of tech’s massive cutbacks. The company refused to clarify an exact number, suggesting only that less than one thousand employees lost their jobs.
While that represents a small fraction of Salesforce’s 73,000-strong workforce, 1,000 out-of-work employees is nothing to sneeze at.
Salesforce did release an official statement on its layoffs, saying, “Our sales performance process drives accountability. Unfortunately, that can lead to some leaving the business, and we support them through their transition.”
Though not as bombastic or high-profile as Twitter’s, the Salesforce layoffs mark yet another beat in the continuing layoff drumline. The news also follows activist investor Starboard Value’s announcement that it took an undetermined stake in the company a month ago.
Salesforce stock has declined nearly 39% this year.
Citigroup is another on the list of recent companies performing layoffs that’s relatively low-stakes while indicating an economic shift. The New York-based financial firm shed around 50 trading personnel this week alongside dozens of banking roles.
Citigroup’s layoffs follow the lead of major banks like Softbank, Wells Fargo and Goldman Sachs, all of which have implemented job cuts in 2022. While the bank hasn’t publicly commented on its reduction, the firm has seen a 64% decline in Q3 investment banking operations.
That said, Citigroup has also reportedly been recruiting people to strengthen its position in other industries like tech and healthcare.
Citigroup stock has fallen more than 23% since January.
Facebook parent Meta plans to initiate layoffs to the tune of 11,000 staff members, or 13% of its global workforce, CEO Mark Zuckerberg announced this week.
In Meta’s statement, Zuckerberg explains that he takes “accountability” for widespread cuts, noting that he grew the company too far, too fast. He admitted getting caught up in the huge uptick in growth and online activity throughout Covid, and that he thought the trend would continue post-pandemic.
As a result, he capitalized on the trend by hiring en masse to take advantage of the presented opportunity. However, following declining ad spend and Apple’s privacy update kicked in, the company’s revenue can’t support the same investment in growth and personnel it originally anticipated.
He added that Meta will take several “additional steps to become a leaner and more efficient company by cutting discretionary spending and extending our hiring freeze through Q1.” Some of these steps include reducing team budgets, slashing perks and relinquishing some office leases.
Meta plans to provide every impacted employee with at least 16 weeks of severance, plus two weeks for every year of service. Unused PTO, November RSUs and six months of health insurance benefits will also be included.
Meta’s stock has plunged nearly 67% in 2022.
What’s with all the layoffs?
There’s a common theme behind the layoffs on this list: macroeconomic factors. Inflation, rising interest rates and the risk of recession pile together to produce smaller corporate profits, and in turn, agitated investors.
But a hidden factor compounds these risks: overzealous pandemic hiring practices.
As tech prospects grew throughout the pandemic, many firms threw themselves into capitalizing on the trend, growing their workforces and operations at a blistering pace. But as spending, ushered along by Federal Reserve rate hikes, many companies found themselves staring down a double barrel of reduced profits and angry shareholders.
As such, many tech companies are rethinking the scope of their physical and personnel investments. What we’re seeing now is something of a course correction for companies that grew too big for their britches during turbulent, yet high-flying, times.
Even financial firms like Barclays and Citigroup aren’t immune. But these firms also suggest that spending slowdowns are spreading beyond tech as the financial industry returns to its annual culling prior to bonus season. And it’s possible that the financial sector will see more cuts in the future: JPMorgan Chase and Morgan Stanley are both reportedly mulling job cuts of undetermined scope.
Get ahead of layoffs trends with artificial intelligence
As the layoffs pile up, some economists have warned that the impacts will soon bleed into other industries. Layoffs in the high-profile tech and financial sectors, some say, signals just how far and fast inflation and interest rates are creeping into fast-growing firms’ balance sheets.
Even though employment remains broadly strong throughout the economy, such large, early job cuts could represent trouble on the horizon. Already, big names like FedEx, Amazon and Walmart have indicated that they plan to freeze hiring despite the advancing holiday season. Many smaller companies have or will follow suit in the weeks to come, particularly as revenues begin to slow down.
As an investor, these layoffs represent both risks and opportunities.
While smaller balance sheets may be positive for companies restraining out-of-control spend, in some cases, it may not be enough to stem the bleed. Not only that, but the bulk of these particular job cuts occurred in the tech industry, which has been slammed in the financial markets since spring.
And if the creep into the financial sector is any indication, these cuts could be the first of dozens in other industries, suggesting that an economic downturn – and potentially more portfolio declines – lie ahead.
In other words: it’s likely that the already-volatile market will remain volatile for a while yet. For investors, that means buckling down and readying for the heave-ho of stormy seas and mixed returns for a few months yet.
Fortunately, you don’t have to go it alone. With the advanced expertise of Q.ai’s artificial intelligence, investors can plan ahead by investing in trends and sectors that they (and we) think could produce long-term returns. We can help you diversify with our Active Indexer Kit, target volatility with Bitcoin Breakout, or steady the ship with a variety of Foundational Kits to start you off right.
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