November has been the source of a mixed bag of emotions. While the US economy seemed to grow with businesses adding 261,00 new jobs, the recent spate of tech layoffs has made it impossible to ignore the upcoming recession.
The latest entrants in layoff 2022 are Meta Inc. and Twitter. Meta Inc., has seen revenues dwindling since last year and has decided to layoff almost 13% of its workforce. After acquiring Twitter for $44 billion, Elon Musk has laid off over 50% of the micro-blogging site’s workforce.
Signs of a recession and layoffs
The US economy has been battered by a high inflation that has derailed shopping habits and household budgets. Across corporate America, companies have reduced their forecasts and initiated cost cuts to deal with the impending recession.
While the US economy news has not been very encouraging, the growing number of companies posting a decline in revenues and scaling back growth plans do not work well for the future. One major way businesses have taken to cut costs is by initiating layoffs.
Meta and Twitter’s firings are just an extension of the tech layoffs that have dominated much of layoff 2022.
Meta layoffs
On November 6, Meta revealed that it will be firing around 11,000 employees as rising inflation and declining daily users have reduced ad revenue and growth prospects.
Social media giant Facebook CEO Mark Zuckerberg blamed declining revenue on increased competition and the downturn in the US economy. The company has initially announced a hiring freeze in September. Investors have been concerned about Meta’s performance as TikTok has eaten into profits with a growing user base and advertising deals. Despite talks about TikTok’s loose privacy features, its addictive interface has get the younger generation hooked.
Meta managed to hold out all these years despite scandals and privacy issues with a solid dialy user base and advertising revenues. But the company’s focus on building the metaverse and declining users have rattled advertisers.
Twitter Layoffs
Last Friday, Musk announced that Twitter will be laying off thousands of employees across departments. Yoel Roth, head of Twitter’s trust and safety team, confirmed overall headcount was cut by roughly 50%, as the company revamps itself under Musk.
Although Musk has said that the company has tremendous potential, there is no denying that the layoffs have reignited conversation about the state of the US economy.
It is a strong indication that tech companies have noted the reduced demand from consumers and massive drops in revenue. Most tech companies witnessed massive growth during the pandemic but have been unable to sustain it as a record-high inflation rocks the economy.
As companies cut forecasts and reduce growth plans, investors have started money away from risky assets and investing in profitable assets that work for the long-term. Tech layoffs also signal recession as companies brace for reduced demand for services and try to stay afloat.
One of the major effects of The Great Recession was layoffs and a higher unemployment rate. An increasingly grim outlook could translate to over one million Americans losing their jobs between now and the end of 2023.
Wall Street’s Recession Prep
Wall Street has reacted to the bleak outlook with dropping stock futures and the market is officially on track to matching the performance of the 2008 recession.
It is no secret that public markets have been hit hard and layoffs 2022 have affected consumer lifestyles. With worsening inflation, geopolitical strife, and rising interest rates, the stock market has seen one of its worst years since 2008. Valuations have dipped and companies going for IPOs have had to massively scale back expectations.
As the Fed hikes interest rates, companies have put expansion plans on hold and started preparing for the worst. Economists predict that recession will mostly last all of next year and maybe even spill into 2024. They are convinced that the Fed’s interest rates will trigger a recession that will force companies to reduce spending.
