Big tech companies are laying off workers or suspending hiring at an alarming rate as tech companies brace for a potential recession triggered by stubbornly high inflation and rising Federal Reserve interest rates, according to Michael Wilson, chief. Morgan Stanley’s equity strategist, US stock the bear market is approaching the bottom and more general layoffs are one of the key signals of the US stock bull market.
While the job market remains strong and wages have hit record highs, big tech companies are grappling with an increasingly bleak economic outlook.
Big tech companies like Twitter, Meta, Apple, Amazon, and Lyft are pushing layoff plans or suspending hiring as the Federal Reserve drastically hikes interest rates to fight the inflation behemoth. Economists broadly expect the Fed to trigger a recession with higher interest rates, forcing consumers and ultimately businesses to cut back on spending.
Apple (AAPL-USA) froze labor hires outside the R&D department in an effort to save next year’s budget. The Wall Street Journal reported that Meta (META-US) plans to begin mass layoffs that are expected to affect thousands of workers this week, with details to be announced as soon as Wednesday.
With the uncertain economic environment, Amazon (AMZN-USA) suspended the hiring of employees. Twitter announced massive layoffs last week, with some 3,700 Twitter employees fired. Musk tweeted Friday that when Twitter was losing more than $ 4 million a day, firing workers was a trivial decision.
Lyft Passenger Transport Company (LYFT-US) announced last Thursday that it would lay off about 13% of its workforce (nearly 700 employees) for fear of an impending recession. Hard drive manufacturer Seagate forced the company to lay off 3,000 jobs due to deteriorating demand.
Initial jobless claims in the United States have fallen from their summer peak in recent months. The number of initial jobless claims in the week ending October 29 was 217,000, down 1,000 from the previous 218,000. At 261,000, well above the market’s expectations of 200,000, the job market has been surprisingly solid.
The latest forecast released by the Federal Reserve in November shows that the unemployment rate in the United States is expected to rise from the current 3.5% to 4.4% by the end of next year, which is significantly higher than the previous forecast of the year. 3.7%. which means that approximately 1 million Americans may be unemployed between November and the end of next year.
“Companies are expected to reduce headcount less than expected as companies face recruiting challenges early on and technology companies should block more hires than layoffs,” Chris Shipley, chief investment strategist for the North America at Northern Trust Asset Management, he said last week. This situation will continue.
Peter Garnry, Head of Equity Strategy at Saxo Bank, said: “The layoffs will stabilize the situation and improve sentiment in tech stocks, but interest rates will be even higher next year and the economy could slide into recession. , reducing growth expectations “.
Michael Wilson, a big bear on Wall Street, judged: “Before US equities can become more optimistic, companies need to significantly cut spending and when the layoff cycle really begins, it will be one of the key elements of our bull market. US The loss of operating leverage will stop and US equities are close to the bottom of the bear market.
