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| DATE | 2023-01-26 |
| FROM | Ruben Safir
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| SUBJECT | Subject: [Hangout - NYLXS] Here we go - the post-Covid-19 economic fallout
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Corporate Layoffs Spread Beyond High-Growth Tech Giants
Chip Cutter and Theo Francis
8–10 minutes
Dow, IBM and SAP say they will lay off thousands of workers as
belt-tightening becomes the new business priority
Updated Jan. 26, 2023 4:57 pm ET
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Dow Inc., DOW 0.40%increase; green up pointing triangle
International Business Machines Corp. IBM -4.48%decrease; red down
pointing triangle and SAP SAP -1.77%decrease; red down pointing triangle
SE joined the string of companies outlining plans to cut thousands of
jobs to prepare for a darkening economic outlook even as the nation’s
labor market remains tight.
The headline-grabbing expansion of layoffs beyond high-growth technology
companies stands in contrast to historically low levels of jobless
claims and news that companies such as Chipotle Mexican Grill Inc. and
Airbus SE are adding jobs.
This week, four companies trimmed more than 10,000 jobs, just a fraction
of their total workforces. Still, the decisions mark a shift in
sentiment inside executive suites, where many leaders have been holding
on to workers after struggling to hire and retain them in recent years
when the pandemic disrupted workplaces.
Unlike Microsoft Corp. and Google parent Alphabet Inc., which announced
larger layoffs this month, these companies haven’t expanded their
workforces dramatically during the pandemic. Instead, the leaders of
these global giants said they were shrinking to adjust to slowing
growth, or responding to weaker demand for their products.
“We are taking these actions to further optimize our cost structure,”
Jim Fitterling, Dow’s chief executive, said in announcing the cuts,
noting the company was navigating “macro uncertainties and challenging
energy markets, particularly in Europe.”
The U.S. labor market broadly remains strong but has gradually lost
steam in recent months. Employers added 223,000 jobs in December, the
smallest gain in two years. The Labor Department will release January
employment data next week.
Economists from Capital Economics estimate a further slowdown to an
increase of 150,000 jobs in January, which would push job growth below
its 2019 monthly average, the year before pandemic began.
There is “mounting evidence of weakness below the surface,” Andrew
Hunter, senior U.S. economist at Capital Economics wrote in a note to
clients Thursday.
Last month, the unemployment rate was 3.5%, matching multidecade lows.
Wage growth remained strong, but had cooled from earlier in 2022. The
Federal Reserve, which has been raising interest rates to combat high
inflation, is looking for signs of slower wage growth and easing demand
for workers.
Many CEOs say companies are beginning to scrutinize hiring more closely.
Slower hiring has already lengthened the time it takes Americans to land
a new job. In December, 826,000 unemployed workers had been out of a job
for about 3½ to 6 months, up from 526,000 in April 2022, according to
the Labor Department.
“Employers are hovering with their feet above the brake. They’re more
cautious. They’re more precise in their hiring,” said Jonas Prising,
chief executive of ManpowerGroup Inc., a provider of temporary workers.
“But they’ve not stopped hiring.”
Additional signs of a cooling economy emerged on Thursday when the
Commerce Department said U.S. gross domestic product growth slowed to a
2.9% annual rate in the fourth quarter, down from a 3.2% annual rate in
the third quarter.
Not all companies are in layoff mode. Walmart Inc., the country’s
biggest private employer, said this week it was raising its starting
wages for hourly U.S. workers to $14 from $12, amid a still tight job
market for front line workers. Chipotle Mexican Grill Inc. said Thursday
it plans to hire 15,000 new employees to work in its restaurants, while
plane maker Airbus SE said it is recruiting over 13,000 new staffers
this year. Airbus said 9,000 of the new jobs would be based in Europe
with the rest spread among the U.S., China and elsewhere.
General Electric Co., which slashed thousands of aerospace workers in
2020 and is currently laying off 2,000 workers from its wind turbine
business, is hiring in other areas. “If you know any welders or
machinists, send them my way,” Chief Executive Larry Culp said this week.
Annette Clayton, CEO of North American operations at Schneider Electric
SE, a Europe-headquartered energy-management and automation company,
said the U.S. needs far more electricians to install electric-vehicle
chargers and perform other tasks. “The shortage of electricians is very,
very important for us,” she said.
Railroad CSX Corp. told investors on Wednesday that after sustained
effort, it had reached its goal of about 7,000 train and engine
employees around the beginning of the year, but plans to hire several
hundred more people in those roles to serve as a cushion and to
accommodate attrition that remains higher than the company would like.
Freeport-McMoRan Inc. executives said Wednesday they expect U.S. labor
shortages to continue to crimp production at the mining giant. The
company has about 1,300 job openings in a U.S. workforce of about 10,000
to 12,000, and many of its domestic workers are new and need training
and experience to match prior expertise, President Kathleen Quirk told
analysts.
“We could have in 2022 produced more if we were fully staffed, and I
believe that is the case again this year,” Ms. Quirk said.
The latest layoffs are modest relative to the size of these companies.
For example, IBM’s plan to eliminate about 3,900 roles would amount to a
1.4% reduction in its head count of 280,000, according to its latest
annual report.
The planned 3,000 job cuts at SAP affect about 2.5% of the
business-software maker’s global workforce. Finance chief Luka Mucic
said the job cuts would be spread across the company’s geographic
footprint, with most of them happening outside its home base in Germany.
“The purpose is to further focus on strategic growth areas,” Mr. Mucic
said. The company employed around 111,015 people on average last year.
Chemicals giant Dow said on Thursday it was trimming about 2,000
employees. The Midland, Mich., company said it currently employs about
37,800 people. Executives said they were targeting $1 billion in cost
cuts this year and shutting down some assets to align spending with the
macroeconomic environment.
Manufacturer 3M Co., which had about 95,000 employees at the end of
2021, cited weakening consumer demand when it announced this week plans
to eliminate 2,500 manufacturing jobs. The maker of Scotch tape, Post-it
Notes and thousands of other industrial and consumer products said it
expects lower sales and profit in 2023.
“We’re looking at everything that we do as we manage through the
challenges that we’re facing in the end markets,” 3M Chief Executive
Mike Roman said during an earnings conference call. “We expect the
demand trends we saw in December to extend through the first half of 2023.”
Hasbro Inc. on Thursday said it would eliminate 15% of its workforce, or
about 1,000 jobs, after the toy maker’s consumer-products business
underperformed in the fourth quarter.
Some companies still hiring now say the job cuts across the economy are
making it easier to find qualified candidates. “We’ve got the pick of
the litter,” said Bill McDermott, CEO of business-software provider
ServiceNow Inc. “We have so many applicants.”
At Honeywell International Inc., CEO Darius Adamczyk said the job market
remains competitive. With the layoffs in technology, though, Mr.
Adamczyk said he anticipated that the labor market would likely soften,
potentially also expanding the applicants Honeywell could attract.
“We’re probably going to be even more selective than we were before
because we’re going to have a broader pool to draw from,” he said.
Across the corporate sphere, many of the layoffs happening now are still
small relative to the size of the organizations, said Denis Machuel, CEO
of global staffing firm Adecco Group AG.
“I would qualify it more as a recalibration of the workforce than deep
cuts,” Mr. Machuel said. “They are adjusting, but they are not cutting
the muscle.”
Write to Chip Cutter at chip.cutter-at-wsj.com and Theo Francis at
theo.francis-at-wsj.com
Appeared in the January 27, 2023, print edition as 'Layoffs Edge Higher
In Tight Job Market'.
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