Recession is when your neighbor loses his job. Depression is when you lose yours.
- President Ronald Regan
Episode Summary
Last week’s business news was all Twitter all the time. With Elon Musk as the new owner of the company, and the company losing $4 Million per day, something had to give. Then came the announcement that about half of the company’s employees would be laid off, entire teams in some cases. And yet, Twitter is hardly the only company laying people off this year.
There have been many stories in the papers about individual companies having layoffs. Less common are overarching discussions of all of the layoffs.
In this week’s Dial P audio podcast, Kelly Barner looks into the differences and similarities between the companies associated with recent layoffs:
• Reported layoff details by company and industry
• The varied reasons for those layoffs
• How these layoffs connect to the overall employment situation in the United States… including the looming potential recession
Episode Transcript
Intro/Outro (00:01):
Welcome to Dial P for procurement, A show focused on today’s biggest spin supplier and contract management related business opportunities. Dial P investigates the nuanced and constantly evolving boundary of the procurement supply chain divide with a broadcast of engaged executives, providers, and thought leaders. Give us an hour and we’ll provide you with a new perspective on supply chain value. And now it’s time to dial P for procurement.
Kelly Barner (00:31):
Last week’s business news was all Twitter all the time with Elon Musk as the new owner of the company and the company losing 4 million a day, you knew something pretty significant was going to change and fast, and so the announcement that about half of the company’s employees would be laid off entire teams in some cases hardly comes as a surprise. At the same time, there are plenty of other companies laying people off this year. A few months ago, I started noticing a lot of stories in the newspaper about individual companies having layoffs. What I wasn’t seeing was any meaningful discussion of all of the layoffs, something that would give us a better sense of just how much of a trend is beginning. And so I started my research. Now in that process, I did come across some summary articles in overall commentary, but it is interesting that individual company news always seems to come through louder.
Kelly Barner (01:38):
In this episode of Dial P, I’ll review some of the details on reported layoffs by company and industry. A few of the reasons for those layoffs because there are lots of different justifications, and finally how these stories connect to the overall employment situation in the United States, including the looming potential recession. But before I go any further, let me introduce myself. I’m Kelly Barner. I’m the co-founder and managing director of Buyers Meeting Point. I’m a partner at Art of Procurement and I’m your host for Dial P here on supply chain. Now I’m constantly scanning the news for complex topics to discuss things that are interesting but could easily escape our notice. Dial P releases a new podcast episode or interview every Thursday, so be on the lookout for future episodes and don’t forget to check out past episodes as well. Now before I get back to today’s topic, I have a quick favor to ask.
Kelly Barner (02:41):
I work really hard to ensure that you find value in the time we spend together. If you do, please find a way to engage. We have listeners on all kinds of platforms and devices, so you can give us a review on iTunes, offer up some stars as a rating, share this podcast or like a post on LinkedIn or Twitter. You can even just forward this link to a colleague. I’m grateful for your interest and attention to what we’re building here at Dial P and I want to hear from you about these episodes. Now, before I get into the specifics about the layoffs, I feel like I need to address the human side of what we’re about to discuss. As I mentioned, I’ve done research and I have numbers and workforce percentages for many of the companies we’re going to talk about. They range from 5% to 50% in terms of layoffs, but each person being laid off is losing 100% of their income in many cases, by no fault of their own.
Kelly Barner (03:47):
I have been laid off. It is heartbreaking, and I didn’t even have a family to support at the time. There have even been recent layoffs within procurement. My friends have lost their jobs and the holidays are only weeks away. I’m gonna cover this story from a business and economic perspective, but do not think for one minute. I’m not cognizant of the impact these stories have on thousands of families and communities. If you have recently lost your job, my heart goes out to you, and I know this doesn’t seem like much consolation right now, but this could end up being the best thing that ever happened to you professionally. Being laid off, landed me in procurement and led me to meet some of my best friends in the whole world. You are walking through hell right now and the only thing you can do when you’re walking through hell is to keep going.
Kelly Barner (04:47):
As Winston Churchill said. Now let’s start with a discussion of why. So it’s easy overall to blame the economy, to blame inflation, to blame the disruption from the supply chain or the pandemic. And while all of these things are very real and they do play a role in each one of these layoff decisions, giving them sole credit on a company by company basis washes over the nuance in each deal, and that’s the interesting part. We’ve been in incredibly hard to understand times and even harder to predict, but I have to say, even as a rookie covering layoffs, some of these decisions, the hiring decisions that led companies to the point where they have to have massive layoffs seem pretty hard to justify. As we dig deeper into the stories and the explanations shared by some of these specific companies, cost cutting is huge. That’s the obvious reason.
Kelly Barner (05:48):
Now, in some cases, companies overestimated their potential for market share growth or the ability to sustain growth that they were seeing. In cases where specific business units are being affected by targeted layoffs, in some cases it’s a result of demand being reduced as consumers switch their spending habits and their activities. I noticed a few other things across these stories. One is the impact of the Warren Act. So Warren is an acronym. It stands for Worker Adjustment and Retraining Notification Act. It requires companies to disclose their numbers and provide workers with sufficient notice. It’s actually the foundation of a lawsuit pending against Twitter. It exists federally and at the state level, and it applies to different companies based on size. Now, many of the companies I have detail on had to file because of the War Act, and that’s where we get this information. I’ve also noticed that a lot of companies have had multiple rounds of layoffs just this year.
Kelly Barner (06:56):
Some of these companies, three or four rounds, a few hundred at a time as opposed to thousands of people all at once. Now, there may be a PR advantage to having smaller, more localized layoffs as opposed to one big round of really bad news. Not sure. I think we could probably debate that, but either way, I think it’s really hard on the people still working at that company when every three or four months there’s another round of names of colleagues that no longer work with you. Again, an interesting observation that for especially B2C companies, these layoffs do seem split between location based roles and corporate roles. There have been plenty of executive level layoffs, so these just aren’t end workers that are being terminated. And the one that mystifies me most of all is when companies are specifically laying off people in sales and marketing.
Kelly Barner (07:50):
Maybe again, this is my inexperience with being in HR and making corporate layoff decisions, but it feels like if there’s anything that could pull your company out of a financial tailspin, it would be your sales and marketing team. Now, I’m gonna give you specific company examples, and I have them roughly grouped by like industry, but this extends across the entire economy. PWCs people and organization group did research into this, and of the companies they spoke to, 50% anticipate layoffs. This year, 52% expect to have hiring freezes, and 44% of the companies are expecting to rescind job offers that they’ve made. I wanna start by giving you a quick rundown of company names associated with layoffs in 2022. Don’t worry about remembering these, I’ll come back to them, but let their number and variety just wash over you. Warning in advance, this is scary stuff. The gap beyond Meat, Microsoft, Oracle, ubs, Twitter, Ford, Seagate, Technology, Phillips, Hello, Fresh Intel, Wells Fargo, Google, Warner Brothers, Discovery, Lift, Stripe, Amazon, Robin Hood, Shopify, Peloton, Netflix, Snap, Incorporated, Stanley Black and Decker, Corteva, Goldman Sachs, Walmart, Morgan Stanley, Better Redfin, Remax Compass, Wayfair seven 11, the Mayo, Tesla, Rivian, JP Morgan, Carvana, num, PayPal, and Best Buy.
Kelly Barner (09:47):
And this is not a comprehensive list by any means, but it gives you a sense, and as many companies are making their Q3 earnings statements, a lot more of them are coming out with hints or making outright comments about plans to layoff very much in line with what PWC found in their study. So I mentioned the gap. Let’s start with retail. This is probably the least surprising sector to see layoffs in. We know about inventory problems affecting working capital, and so it was only a matter of time before this started to take a toll on the workforce. Gap has laid off 500 corporate employees. That’s 5% of their workforce. They’ve also committed to close down 30% of their gap and Banana Republic stores by 2024 mostly affecting malls. Old Navy, which is their largest operating segment. They had a sizing snafu that really did not help this situation.
Kelly Barner (10:48):
If you’re interested in more about that, go back and check out episode 26 of Dial P, Losing the plot, social mission versus business fundamentals. I went into that in detail there and that was the operational issue. Now we’re starting to see the workforce fall out. Shopify e-commerce has laid off a thousand people or 10% of their staff and Walmart. This is interesting. They’re actually making a couple of different kinds of changes. They’ve laid off 1700 employees, but they’re also changing how they staff up for the holidays. Typically, they would’ve brought in about 140,000 full-time employees to get through this time of the year. Instead, they’re hiring just 50,000 employees and they will be specifically brought in as temporary workers. Now we move into technology. This is the sector where the layoffs are getting a lot of attention, and yet it is important to remember that they only represent a small portion of overall employment in the us.
Kelly Barner (11:54):
Microsoft is estimated to have eliminated about a thousand jobs. They’ve declined to say specifically, but what’s interesting and seems to surprise even insiders, is that it included their Xbox gaming division. So when you’re starting to touch sacred cow workforce categories, that’s a little additional sign that something’s gone awry. Oracle, again, the number is unknown, but potentially thousands was the estimate I found. Seagate technology has laid off 3000 employees and Intel has seen a sudden and rapid decline in sales, which has led them to make thousands of layoffs in total, including 20% of their sales and marketing staff. That’s that one I have to wonder about. Google is laying off 50 people, which represents about half of the hundred and 20 employees in their area, one 20 startup incubator. Now, they’ve been given 90 days to find new positions internally and be accepted for them or their positions will be eliminated and they will be laid off.
Kelly Barner (13:01):
The Mayo. The slide and video hosting site has laid off about 6% of their staff or 73 people, and PayPal did lay off 83 people, although it’s an incredibly small percentage of their 30,000 person workforce. If we turn to meat, we start with beyond meat. 19% of the workforce has been laid off, which is about 200 positions. The company made a statement about needing to right size in the face of declining sales, meaning maybe people were willing to experiment with these products, but longer term, those changes in consumption were not lasting. Additionally, interesting is the fact that they are eliminating their chief supply chain officer position and folding that responsibility back into operations. Obviously, I’m not objective, but that seems like a bad decision. Hello, Fresh. The whole meal kit company interest in their product surged during the pandemic. As people couldn’t go to restaurants, they’ve laid off 611 workers, cor agriscience laid off 5% of their global workforce or about a thousand people, and seven 11 has eliminated 880 corporate jobs, mostly resulting from a corporate acquisition that they made.
Kelly Barner (14:23):
Now let’s talk about the media, and in this I’m including both television and studios as well as social media. There’s been a real battle going on, sort of like the battle between bricks and mortar and e-commerce. In this case, the battle has been between streaming services versus traditional studios that would’ve been creating content. Warner Brothers. Discovery was created by bringing together Warner Brothers, cnn, hbo, and the Discovery Channel Networks. They’ve eliminated about a thousand jobs since April of this year, including hundreds of ad sale employees. I already mentioned Twitter. They made enormous news last week eliminating about 7,500 workers or half of their staff, and that lawsuit in California is still pending. Netflix has laid off about 500 people. Snap Inc, which is the company that owns and runs snapchat, has laid off 1200 people representing about 20% of their workforce. Noom. The weight loss app has eliminated 495 people, similar to the others, about 20% of their staff.
Kelly Barner (15:34):
Now, here’s an interesting one, and here’s where I actually need to time and date stamp myself. It is currently New Eastern on Monday, November 7th and this morning the news started to hit all of the papers about meta laying off. It says the parent company of Facebook, They are expecting extensive layoffs, and while we don’t have specific numbers yet, because the actual announcements haven’t been made, many thousands are expected to lose their jobs. As soon as this Wednesday, the day before this episode, you’re listening to heirs for the first time. Now, this is not only notable because of the scope, it’s also notable because according to the Wall Street Journal, this is the quote, first broad headcount reduction to occur in the company’s 18 year history. So this isn’t a cycle of boom and bust or right sizing or adjustment for them. This is a major course correction.
Kelly Barner (16:33):
Even the money people aren’t exempt. Finance and banking are seeing a lot of layoffs as well. Wells Fargo has laid off over 400 people this year. Stripe the payment processing company, 14% of their staff, about a thousand people, JP Morgan, another thousand people in this case, in their home lending unit, and we’re gonna talk about real estate in a moment. Last but not least, in this category, Robin Hood, you may actually associate them with that crazy game Stop means Means stock trading thing. They eliminated 390 staff members, 9% of their staff in April, and then another 23% of the remaining staff in August. That puts them at about a thousand people this year. So let’s talk about real estate. This is an area where we can really see consumers and homeowners starting to make very different decisions that are having an impact on jobs in different kinds of companies in the industry, demand for new homes has tanked in response to high prices.
Kelly Barner (17:42):
Now, those prices were high because the demand was previously so high and with interest rates high and rising, thank you, Fed, people are changing their minds and staying where they are. Redfin has eliminated 470 positions or 6% of their workforce, Remax, 17% Compass real estate brokerage, 10% or about 450 people and better mortgage lenders, 4,000 people losing their jobs. Another industry with numbers on that scope, healthcare and fitness. Phillips, the medical device company, has laid off 4,000 employees and they blame worsening macro conditions for that. That’s an example of where, yeah, we probably could have guessed worsening macro conditions. Wouldn’t you just love them to be a little bit more specific? Now, here’s the example in this category that I felt like at the time I was taking crazy pills. Peloton, did they really think that that surge in their customer base was going to stay long term?
Kelly Barner (18:55):
They’ve had four rounds of layoffs in 2022 for a total of 4,600 employees. I remember the pandemic days, the gyms were all closed, everybody had to stay home. We were all going out of our minds with nervous energy and it seemed like a fabulous idea to get a Peloton. The wait time for those devices was incredible, and yet somehow their company leadership thought this was going to be the beginning of a new era in personal fitness, and that even once the gyms reopened, there wouldn’t be significant fall off in demand. They were wrong. The increase in demand was temporary. Artificial is a result of the pandemic, but they grew and restructured as though it was going to be forever. I guess as an executive, you have to be optimistic, but still, and they’ve also suffered from bad pr, not a great look when they canceled their company-wide Christmas party in favor of an invite only Christmas party that apparently only executives and instructors were invited to attend.
Kelly Barner (20:04):
Ye, that is not good pr. When we look at automotive and transportation, there are a couple of different dynamics going on, and Ford provides us with a great example of this. The rumor not confirmed by the company is that they’ve laid off 3000 office and contract employees. Now they’re saying they didn’t actually lay these people off, although they have adopted a new provision in their employee workbook that addresses how poor performance will affect employment, they’ve drawn a shorter straighter line between missed expectations and losing your job. Now, in July of 2022, they actually laid off 8,000 employees as part of their transition to electric vehicle production. So they have both a production or an operational shift and also the challenges of the economy going on. In parallel, Tesla has laid off 229 workers Rivian. The electric vehicle maker has laid off 840 people. That’s about 6% of their workforce, and it doesn’t just affect car purchases.
Kelly Barner (21:12):
Carvana, although these are used car purchases, 12% of their staff, about 2,500 people and Lyft, they laid off 60 people in July and more recently, another 700 jobs or 13% of their remaining staff. Now, this does not include drivers because of their freelance model. So all of that is corporate. We talked a little bit about retail, but let’s look at some other consumer goods companies. Stanley Black and Decker won’t report their numbers and they deny common reports that they’ve laid off about a thousand people. Wayfair has laid off 870 people, which only represents about 5% of their global workforce, but 10% of their corporate team. So this is an example of where they saw layoffs heavy at the highest levels, and another company that has declined to say Best Buy. The Wall Street Journal reports hundreds. Now, in addition to companies laying people off, there are a number of hiring freezes that have been underway.
Kelly Barner (22:19):
Apple and meta, maybe they were trying to avoid having to have the layoffs that are probably coming this week. Goldman’s Sachs group is revamping their staffing. It’s a nice little euphemism. Usually they get rid of somewhere between one in 5% of their workforce, sort of a GE Jack Welsh kind of a model, but they’re changing the way they do it, and that would be another way to sort of obscure having a layoff as a sign that something’s gone awry at your company. CH Robinson, which is the largest US freight broker by revenue, said in their Q3 earnings announcement that layoffs may be coming and logistics and supply chain and freight, Those are all early indicators for a change in the overall economy. So the idea that the largest freight broker sees potential layoffs coming on the horizon, that does give us one more piece of evidence about whether or not we’re gonna slip into recession in 2023.
Kelly Barner (23:17):
Morgan Stanley, another general statement signs indicate that layoffs are coming. So here’s the confusing part. The jobs numbers seem to be holding strong, at least in aggregate, but then all of these companies and all of these positions that are being eliminated, according to the October jobs report from the Bureau of Labor Statistics, unemployment rose to 3.7% last month. That’s up 0.2%, so up, but a tiny bit. The bigger issue is the labor participation rate, which is currently at 62.2%. Now that’s down about 1.2%, but largely unchanged for the year. What it really means is that there’s one to 2 million people who currently aren’t working that otherwise would be, or that you would expect to be working based on their skills and their health and their age. Most of those people fall into two groups, the 20 to 24 age bracket and the 65 plus age bracket because of inflation and the attempt to ward off recession, the Fed wants or needs unemployment to rise so that upward pressure on wages will be reduced, and what this means is that we’re likely to have more layoffs before we get through this spell.
Kelly Barner (24:42):
Now, here are a few of my key takeaways from researching this episode. Hindsight is 2020 and executives are just people too, so you have a responsibility as an employee, look at the financial state of your company before you make a switch and ask yourself, is the growth trajectory that they think they’re on going to hold? Does this seem like a secure position? As my dad always said, every single one of us is just one paycheck from the street, so be extra careful about making big purchases or making job changes, especially if you have a family and other dependents. All of us are impacted by the larger economy, but there will always be winners and losers, sometimes by industry, sometimes by luck, and sometimes by strategy. Just like Mr. Rogers would say, Always look for the helpers in any situation. Look for the companies that are thriving in today’s economy and see if you can figure out if they’re positioning themselves to preserve their success even as the economy changes.
Kelly Barner (25:52):
Now, that’s my point of view on this situation, but I wanna hear what you think. First of all, do you know anyone who has been laid off, yourself included, Are you looking for early signs of risk within your own company? Wasteful spending? Reckless hiring people who don’t seem to be doing a whole lot but are around. That’s the kind of groundwork that sets the stage for future layoffs. And then of course, there’s always a few canaries in every coal mine. When the superstars and the high performers start to leave your company, that is your signal to go, and if you happen to be one of those canaries, I’d be interested to know what’s your read on the market? What’s factoring into your decision to make a change? Please find me on social media. Please add a comment. Please share this as I’ve asked. Until next time, I’m Kelly Barner. On behalf of Dial P and the team at Supply Chain now, thank you so much for listen and have a great rest of your day.
Intro/Outro (26:55):
Thank you for joining us for this episode of Dial P for procurement, and for being an active part of the supply chain Now community. Please check out all of our shows and events@supplychainnow.com. Make sure you follow Dial P four procurement on LinkedIn, Twitter, and Facebook to catch all the latest programming details. We’ll see you soon for the next episode of Dial P four, Procurement.
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