With inflation at an all-time high and economic uncertainty looming, many economists are predicting that there will be a recession in 2022 or 2023. Banks and economists alike are sounding the alarm, advising that the United States is likely heading towards an economic downturn. Many corporations are preparing by putting their own recession plans into play, including layoffs and hiring freezes.
Naturally, Americans are finding themselves increasingly apprehensive about job security and their financial futures.
A new survey from Insight Global (conducted June 2022) found that nearly four out of five Americans (78%) are fearful about job security during the next recession. More than half of respondents expressed concerns that they aren’t financially prepared or don’t know how to prepare for potential recession.
As companies prepare to put their recession plan into full swing, we’ll look at which companies are doing so and what this means for the current job market.
Corporate Layoffs and Hiring Freezes
The anxiety of American workers isn’t without merit.
The high likelihood of recession in conjunction with recent drops in the stock market have led many major corporations to enact hiring freezes and widespread layoffs across the United States. These changes are occurring across industries and aren’t limited to the financial sector. Tech companies, communications companies, and more – including industry leaders and innovators like Google and Tesla – are all feeling the pressure. Even behemoths like Amazon are finding themselves needing to make adjustments to their current staffing.
Major financial institutions such as Goldman Sachs and Wells Fargo have warned of an impending recession, with Goldman Sachs chief executive Lloyd Blankfein calling the likelihood of recession “very, very high risk.” Charlie Scharf, CEO of Wells Fargo, said that there’s “no question” of a rapidly approaching economic downturn, saying a recession will be “hard to avoid.”
Wells Fargo recently started layoffs in the home lending department, citing “cyclical changes in the broader home lending environment.” The company blamed higher interest rates, a lack of refinancing, and the current challenges of home ownership affordability. The bank warned investors that mortgage business may drop almost 50% from the prior quarter, which had already evidenced a downturn.
The company stated that they were committed to retaining as many of their employees as possible, and implied that some of these employees could be absorbed by other departments within the company. Employee chatter online pointed to job cuts in at least five markets: Phoenix, Arizona; Charlotte, North Carolina; San Antonio, Texas; Des Moines, Iowa; and Minneapolis, Minnesota. The company’s CFO, Mike Santomassimo, called current market conditions “the steepest quarterly decline in the mortgage arena since 2003.”
In February, pandemic breakout star Peloton replaced its CEO and started mass layoffs, including 20% of its corporate positions. Overall, there were approximately 2,800 layoffs during this first round. The company quickly moved to slash spending by reducing the number of company-owned warehouses and outsourcing some operations, including delivery, in an effort to save $800 million in annual costs.
Peloton’s outed CEO, John Foley, admitted that the company scaled “too rapidly” and over-invested in some areas. Investors voiced “grave concerns” about the company’s performance and profitability. In July, the company announced it would stop making its own bikes and treadmills in yet another effort to cut costs. This is said to result in another round of layoffs – approximately 600 – at Tonic, a manufacturing partner Peloton acquired in 2019.
Streaming giant Netflix has already seen two rounds of layoffs so far in 2022. During both rounds of layoffs, U.S. employees have taken the biggest hit. Netflix was sure to clarify that the layoffs were “primarily driven by business needs rather than individual performance.” This sentiment probably makes little difference to the hundreds of employees who have found themselves without employment. Unfortunately, more layoffs may be imminent. The most recent round of layoffs happened in June 2022. Since then, July reports reveal that Netflix lost almost a million customers in the last quarter, making it “the largest quarterly loss in the company’s history.” The company is bracing for more dramatic drops in subscribers for the remainder of the year.
Used-car retailer Carvana recently laid off 2,500 people. Those who were victim to layoffs received a minimum of one month’s pay, with an additional week of pay being provided for each year of service, and the “opportunity to receive extended healthcare.” Carvana also announced that its executive team will be forgoing their salaries for the remainder of the year in order to assist with making severance pay possible for those impacted by the layoffs. Prior to these layoffs, the company had stated that they were looking into “plans to better align staffing and expense levels with sales volumes.”
AT&T has experienced record layoffs. According to reports from January 2022, the company has let go of a whopping 77,400 employees in four years. This number is so high that it rivals T-Mobile’s entire workforce. Most of the positions that were nixed were either technicians or clerical jobs. The company additionally made plans to permanently close more than 250 AT&T Mobility and Cricket Wireless stores. Pre-pandemic, the company was pursuing initiatives to cut $6 billion in costs.
There are suggestions that AT&T is looking to hire cheaper contractors than employ union members, although the company issued statements saying that “reducing our workforce is a difficult decision that we don’t take lightly,” while explaining the severance packages that they planned to offer eligible employees.
Substack, an email newsletter platform that allows users to publish and monetize posts, is among one of the many tech companies who have found themselves in need of downsizing.
At the end of June, the company’s CEO, Chris Best, tweeted that he was laying off 13 employees. While that number sounds relatively small compared to some of the mass layoffs that have happened in the thousands, like those at Peloton or AT&T, this number accounts for around 14% of Substack’s workforce. Best cited “market conditions” as the driving factor behind the decision. Many employees were surprised by this move, as he had previously stated that “our plan was to grow the team and not do layoffs.”
Allstate has announced a few rounds of mass layoffs since the pandemic. While it seems counterintuitive, these layoffs were announced as part of a strategic growth plan. This plan has also led to a shift in commissions for agents, and the company expects the growth plan to take “multiple years” to come to fruition.
TikTok, the popular social media platform, has started to eliminate jobs. In mid-July, some U.S. TikTok employees were told they would be out of a job, while employees in Europe were advised their positions were at risk and were told to expect contact from human resources soon.
Social media company Twitter is another tech company that has joined the parade of mass layoffs and hiring freeze. It’s estimated that there have been 30,000 layoffs in tech in the last two months. Twitter has been on a hiring freeze for the past few months – which is not unusual when acquisitions are underway — but recently progressed to mass layoffs this month. Reports indicate that 30% of the talent acquisition laid off. This comes amidst the company’s legal battle with Elon Musk regarding his potential acquisition of the platform. The company blames Musk for their advertising revenue slump.
Meta, formerly known as Facebook, is facing its first major hiring freeze in preparation for economic downturn. Founder Mark Zuckerberg announced that they had reduced their hiring goals from 10,000 engineers to between 6,000 and 7,000. Zuckerberg is approaching the headcount reduction as a belief that some of the people employed there aren’t a good fit, saying, “Part of my hope by raising expectations and having more aggressive goals, and just kind of turning up the heat a little bit, is that I think some of you might decide that this place isn’t for you, and that self-selection is OK with me.” Zuckerberg blames the war in Ukraine for the downturn in economic activity.
Despite soaring profits since the pandemic – and raising the price of Prime memberships – Amazon has found itself overstaffed. The company went on a hiring blitz during the early stages of the pandemic in order to keep up with customer demands. At this time, the company has put a hold on developing new office spaces, indicating that they need more time to figure out how much space they actually need due to a hybrid work model. They are also subleasing warehouses. Amazon ranks as the biggest employer in the tech world, with 1.6 million workers.
After imposing a hiring freeze for some departments in April 2022, a month later, Klarna laid off around 10% of its 7,000-member workforce. The fintech startup raised over a billion dollars in two fundraising rounds a year prior, in 2021, but mounting pressures to avoid a “death spiral” for the digital layaway plans. Fears people may default on their payment plans due to economic hardship have also mounted, as regulators have started questioning if Klarna and platforms like it were encouraging consumers to accumulate unaffordable levels of debt.
In May 2022, Microsoft mentioned that it was being cautious with hiring for the Windows and Office divisions. As part of a “strategic realignment,” Microsoft began cutting “a small number” of jobs this month. They have also been reportedly pulling job listings for open roles, opting not to fill them in response to the current economic uncertainty. It’s been reported that the layoffs are affecting less than 1% of Microsoft employees amidst denial that recruitment is being affected, despite a hiring freeze in multiple divisions, such as Windows and Office.
However, Microsoft says that hiring will continue for unaffected divisions.
On July 20, 2022, tech giant Google announced a pause in hiring for at least two weeks. This decision won’t affect any hiring offers that have already been made, but there won’t be any new offers until the hiring freeze ends. This comes after the company previously announced that they would be slowing both hiring and spending for the remainder of the year.
During this brief hiatus in hiring, the company says it plans to review its headcount and staffing needs. Analysts have advised that Google has seen a “slowdown in digital ad spend” and are following in the footsteps of other major players in tech, like Meta.
Apple is also planning for an economic downturn, having revealed that they’re slowing spending and hiring in 2023. This move is noteworthy for Apple, as they’ve traditionally surpassed market predictions – even during COVID – and performed better than their peers during times of economic upheaval. Historically, Apple has not been a company to resort to mass layoffs. Apple plans on leaving some roles vacant as employees depart. Normally, they hire 5% to 10% more employees each year.
Last month, Tesla’s CEO Elon Musk instituted a hiring freeze and warned that job cuts were imminent. Musk mentioned concerns of the company being “overstaffed in many areas” and called for 10% of the workforce to be cut. Despite this, a hiring event was recently held in China, and Musk advised plans to add more factory jobs in the next year. At the end of 2021, Tesla boasted 99,290 active employees. Musk has said that American workers don’t want to work, saying, “people are trying to avoid going to work at all,” and demanding that Tesla workers who were working remotely return to the office full-time or quit.
Lyft, a ride-sharing company based in San Francisco, has made the decision to shutter an entire division of the company. These layoffs are alleged to make up less than 2% of the company’s workforce. Recent estimates surmise that Lyft had approximately 4,453 employees at the end of 2021.
Coinbase, a cryptocurrency exchange platform, laid off 18% of its workforce – 1,100 people — last month. CEO and co-founder Brian Armstrong blamed both the impending recession and the likelihood of crypto to remain low for an extended period. This is also knowns as a “crypto winter.”
Like Peloton and Amazon, Coinbase over-hired during its boom, when it became the first major cryptocurrency company to go public last year. With current revenue shortages, the company can no longer justify the costs of being overstaffed. Some employees found out about the layoff when they lost access to the Coinbase system, triggering notifications to their personal email – a move Armstrong defends. “Given the number of employees who have access to sensitive customer information,” Armstrong said, “it was unfortunately the only practical choice, to ensure not even a single person made a rash decision that harmed the business or themselves.”
Like Allstate, Ford has plans to cut jobs as part of a longer-term “grown plan.” Ford is looking to cut $3 billion of operational expenses in order invest in electric vehicle development. As part of that plan, up to 8,000 employees from the Ford Blue division could lose their jobs. Ford’s Blue division currently has approximately 31,000 salaried workers. The plan hasn’t been finalized yet, but it’s reported that Ford’s CEO addressed the job cuts in a video that went out to employees.
Boeing started aggressively cutting jobs in 2019 in response to a series of successive crises; some due to company issues, such as quality control, and others due to situational issues, such as the decline in the need for aviation during the pandemic. In 2020, Boeing cut 20,000 jobs, with 15,000 of them coming from the state of Washington. After three years of dealing with layoffs, Boeing has just recently started to hire again.
What Does This Mean For the Job Market?
Although a recession may be imminent and some companies are gearing up for one by cutting back, there’s still some great news.
Job postings have bounced back even higher than pre-COVID numbers (by 61%). Also, unemployment numbers are still extremely low at 3.5%–right around where they were before the COVID-19 pandemic. This number is typically encouraging as unemployment numbers don’t keep falling or remain steady during a recession.
The majority of companies are still looking to fill seats, and there are more job postings than there are available workers. (Some of the companies mentioned in this article continue to hire despite hiring freezes or layoffs in certain divisions.) It’s still a job seeker’s market.
“We’re still seeing hiring; we’re still seeing growth,” Insight Global CEO Bert Bean said in a recent Forbes article.
Learn Patience and Focus
Recessions give us “opportunities to learn how to be patient.,” Bean said. “Patience really is a virtue. Recessions give us the chance learn how to patiently wait on the right outcomes. We learn a lot about ourselves in the process.”
Hiring may be freezing or slowing down for the interim, but as a hiring manager, you’ll learn what your company needs when business picks back up in the process. As a job seeker, you will find out what you want out of your job and career.
During a recession, “all the nonsense gets stripped away,” Bean said. “This is as true in our personal lives as it is a work. Recessions give you a great excuse to focus on the things that really matter.”
Contact us and let’s chat about how we can work with each other. We’re in this together, and together, we can make it work.