Layoffs in corporate America have spread from technology to conglomerates

Layoffs in corporate America have spread from technology to conglomerates

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Wednesday, January 25, 2023

Today’s newsletter by Miles Oddland, Head of News at Yahoo Finance. Follow him on Twitter @tweet and on linkedin. Read this and more market news on the go with Yahoo finance app.

The layoffs that rocked the tech sector were the biggest economic story of 2023.

And now, those layoffs seem to be spilling over into new corners of corporate America.

On Tuesday morning, 3M (MMM) announced it would cut 2,500 manufacturing jobs, as slower-than-expected growth followed what the company described as “rapid declines in consumer-facing markets — a dynamic that accelerated in December — along with a significant slowdown in China due to COVID-related unrest”.

The news from 3M follows Monday’s announcement from Newell Brands (NWL) that the Sharpie maker will cut 13% of its office staff.

Sharpie markers owned by Newell Brands are for sale at a store in Manhattan, New York City, US, February 7, 2022. REUTERS/Andrew Kelly

With so many stories of layoffs in the headlines, it’s becoming more difficult for investors and the public at large to balance official data showing that employment remains strong.

This month alone, tech companies have announced more than 50,000 employee layoffs, including from Amazon (AMZN), Alphabet (GOOG, GOOGL), and Microsoft (MSFT).

This week’s news indicates that executives are relieved to announce that headcount cuts will continue to grow in this environment.

However, in December the US economy added 223 thousand jobs. The unemployment rate is at its lowest level in more than 40 years. Last week, just 190,000 workers filed unemployment insurance claims, the lowest number in four months.

“Increased layoffs in the technology sector do not appear to be upending the broader labor market, as these workers are easily absorbed elsewhere,” Bob Schwartz, chief economist at Oxford Economics, wrote in a note to clients last week.

And of course, the size of those layoffs matters — according to data from S&P Capital IQ, 3M employs 95,000 people. Newell, for its part, employs 32,000 people, according to S&P Capital IQ.

Newell cuts a little deeper than 3M. Notably, Newell said those cuts would be for office workers, not manufacturing or other parts of the business.

So while Newell CEO Ravi Saligram said it would “help partially offset the impact of macroeconomic pressures on the business,” the company’s announcement was heavy on consultants’ language — “smart,” “agile,” and “improving” are all facets that came across.

This is, through and through, a corporate restructuring.

Regardless of the economic environment, some companies are always looking to restructure their business, thus reducing the number of employees.

Moreover, this week’s non-tech cuts come at a time when pockets of the economy are still grappling with hiring deficiency.

As 3M chief financial officer Monish Patolawala said on a call with analysts Tuesday, the labor shortage for nurses continues to affect the medical system. For 3M, this meant slower growth in the Medical Solutions segment in the fourth quarter due to fewer elective procedures.

In some ways, this pending shortage is likely to strengthen the executive teams’ determination that the time is right to cut staff. After all, there is still a lot of demand for workers. Just maybe not exactly for your role.

So as layoff announcements continue to pop up during corporate earnings season in the next few weeks, the line that Coinbase (COIN) CEO Brian Armstrong used in announcing his company’s cuts earlier this month still sticks out.

“Over the past 10 years, we, along with most technology companies, have become more focused on headcount as a measure of success,” Armstrong wrote. “Especially in this economic environment, it is important to shift our focus to operational efficiency.”

The challenges facing a company like Coinbase, which is at the center of an emotionally driven emerging market, and 3M or Newell, which makes things like laptops, glue, and gauze — among thousands of other products across hundreds of end markets — in so many ways that they couldn’t be different. more.

But the pool of companies in this country that are publicly traded and subject to share price and shareholder pressure is not very large.

And the set of decisions facing these leadership teams about hiring, firing and acquisition often look more alike than they do differently.

So when a CEO says the time is right to “shift our focus to operational efficiency,” many will follow suit. How far this message will travel will be one of the stories of the year.

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