[Asia Economy New York=Special Correspondent Joselgina] "We are facing an unusual macroeconomic environment." Even the world's largest e-commerce company Amazon and Apple have joined the tech-driven employment freeze by halting hiring. Not only Lyft, which has already conducted a first round of layoffs, but also tech startups are continuing to reduce their workforce due to concerns about an economic downturn. While employment indicators still show a robust level, there is a diagnosis that the employment freeze alarm on the ground is rapidly increasing.
◆Amazon and Apple halt hiring... Big Tech tightens belts
According to the Wall Street Journal (WSJ) on the 3rd (local time), Amazon decided to halt hiring to cope with future economic uncertainties. Beth Galetti, Senior Vice President of People Experience and Technology, stated in a letter to employees the day before, "This hiring freeze will continue for the next few months," adding, "We will make reasonable adjustments while monitoring the future economic and business conditions."
This is an additional measure following last month's announcement to temporarily suspend hiring in the core retail sector until the end of the year. This hiring freeze applies across the business, including technical positions such as software developers. It is reported that it does not apply to staff at distribution centers across the United States.
Amazon's hiring freeze indicates that the recent economic situation is quite serious. In the letter, Vice President Galetti said, "We are facing an unusual macroeconomic environment," and "Considering this situation, we need to balance hiring and investment." Earlier, Jeff Bezos, the founder and chairman of the board, also expressed concern last month by posting a video of David Solomon, CEO of Goldman Sachs, who said "a recession is coming," on his Twitter, stating, "The current economy is telling us to prepare for a crisis." Amazon's performance has significantly deteriorated this year due to growing recession concerns amid the Federal Reserve's (Fed) aggressive tightening.
WSJ reported, "The job outlook in the tech industry has worsened," adding, "Most Big Tech companies, which have experienced unprecedented growth and record profits for years, are gradually retreating after the pandemic due to changes in shopping patterns, re-evaluation of spending from advertising to investment." Previously, Facebook's parent company Meta, Google, Netflix, and others also announced hiring freezes, layoffs, or cost-cutting measures in response to recession concerns.
Apple, currently the world's largest company by market capitalization, is also reportedly halting almost all hiring. Business Insider cited internal sources reporting that this hiring freeze could continue until September next year. Bloomberg also reported that Apple has stopped hiring in most areas except research and development. CEO Tim Cook confirmed the hiring delay policy after last month's earnings announcement.
On the same day, Lyft, the second-largest ride-hailing service in the U.S., announced it would lay off about 700 employees through a second round of layoffs. Lyft's co-founders John Zimmer and Logan Green disclosed this layoff news to employees, explaining the decision was due to several challenges across the economy.
They emphasized, "There is a possibility of facing a recession next year, and ride-sharing insurance costs are also rising," adding, "We worked hard on cost-cutting this summer, but nevertheless, Lyft needs to become leaner." Earlier, Lyft had laid off 60 employees, less than 2% of its total workforce, in July.
◆Spread to startups... Employment indicators remain solid
It's not just Big Tech. As recession concerns rise, startups are also not free from the employment freeze.
On the same day, online payment service company Stripe also announced plans to lay off 14% of its total workforce. Stripe is an online payment service provider competing with PayPal in the U.S. Last year, it was recognized with a corporate value exceeding 100 trillion won, making it the most valuable startup. CNBC reported, "The exact number of Stripe employees is unknown, but it is currently around 8,000," and "about 1,100 will be laid off." The company cited soaring inflation, energy shocks, high interest rates, and a financial tightening environment leading to reduced startup investment funds as reasons for the layoffs.
In addition, Calm, a startup well known for meditation, sleep, and relaxation apps, recently reduced its workforce by 20%. Gopuff, a delivery-specialized startup that grew rapidly during the COVID-19 period, laid off about 1,500 employees, 10% of its global workforce. Fintech company Chime, which provides free mobile banking services, and NFT developer Dapper Labs also undertook restructuring. Cryptocurrency exchange Coinbase Global cut 18% of its workforce this summer, and Robinhood reduced 9%. These companies also cite uncertain economic conditions and recession concerns as reasons for restructuring and hiring freezes.
However, despite these employment freeze warnings, U.S. employment indicators still show a robust picture. Even as the Fed's aggressive tightening raises recession concerns, labor demand remains strong, according to officials. This supports the Fed's tightening measures to curb inflation. Fed Chair Jerome Powell said at a press conference after the Federal Open Market Committee (FOMC) regular meeting the day before that the terminal interest rate could rise further, diagnosing that "the labor market is generally overheated."
The weekly initial jobless claims released that day decreased by 1,000 from the previous week, reaffirming that the labor market remains robust. The October ADP private employment report released the day before also showed an increase of 239,000 from the previous month, exceeding the expected 195,000. This confirmed that the labor market remains strong despite consecutive aggressive tightening and recession concerns.
Market attention is focused on the U.S. employment report for October, to be released on the 4th. Experts expect nonfarm payrolls to increase by 200,000 and the unemployment rate to rise slightly to 3.6%. Bloomberg News evaluated that "the results will be favorable." However, economists predict a smaller increase of 190,000, indicating signs of labor market slowdown. This would be the smallest increase since the end of 2020.
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