Recession Concerns Grow As Amazon Pauses Hiring And Major Tech Companies Announce Layoffs This Week

Topline

Amazon announced plans Thursday to implement a corporate hiring freeze, as the country’s second biggest company contends with rising inflation and economic uncertainty—becoming the latest company this week to adjust its headcount as large tech operations including Lyft, Opendoor and Stripe conduct layoffs, fearing a recession could be around the corner.

Amazon implemented a hiring freeze Thursday, the latest company to reassess its headcount amid … [+] recession fears.

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Key Facts

Amazon’s hiring freeze will last for the “next few months,” Beth Galetti, the company’s senior vice president of people experience and technology, wrote in a statement shared with employees, adding it comes amid an “unusual macroeconomic environment” —it’s the company’s second freeze this fall, following its announcement last month that it would pause hiring for corporate retail positions.

In a similar move, Apple reportedly implemented a hiring freeze across the tech giant’s divisions, Business Insider reported Wednesday, citing unnamed sources familiar with the move.

On Thursday, ride-hailing giant Lyft unveiled plans to cut 13% of its staff (estimated to be 650 of its roughly 5,000 employees—the latest large corporate layoff this year and the company’s second in recent months, following its decision to cut 60 employees in July.

Online financial payment company Stripe will also conduct layoffs, according to CEO Patrick Collison, who announced plans Thursday to slash 14% of the San Francisco company’s workforce (1,120 of its 8,000 employees).

Those layoffs come just one day after Opendoor CEO Eric Wu announced the real estate technology company is letting go of 18% of its workforce (550 employees) as it struggles in the “most challenging real estate market in 40 years,” and two days after AI lending startup Upstart confirmed to Forbes it will lay off 7% of its workforce.

Key Background

On Wednesday, the Federal Reserve raised interest rates by 75 basis points for a fourth time this year, to a target range of 3.75% to 4%—the highest it’s been since early 2008—and analysts predict smaller rate hikes could follow. Despite the hike, which the Fed uses to temper consumer demand amid high inflation, consumers could still “feel the pain of a slower economy before we see the gain of lower inflation,” BankRate Chief Financial Analyst Greg McBride said in a statement to Forbes, as businesses cope with not only high inflation, but surplus issues amid a slowdown in manufacturing. Markets have also tumbled in recent months, with the S&P 500 falling 22% this year, to 3,738.65, while the Dow Jones Industrial Average falling 12.2% on the year, to 32,122.74 and the tech-heavy Nasdaq Composite dropping 34.29%, to 10,403.79, as of Thursday afternoon. The unemployment rate, however, remains low, decreasing to 3.5% in September, as the labor market added roughly 263,000 new jobs, according to data from the Labor Department.

Contra

Although many economists have warned for months that the U.S. is likely headed toward recession, others have been more optimistic in their economic forecasts. In a statement on Tuesday, Schroders chief economist Keith Wade argued businesses have been largely resilient in light of high inflation, adding that companies are operating at a surplus, according to the Federal Reserve’s flow of funds data. Another positive sign: gross domestic product has started to increase in recent months following reports in June that the economy contracted 1.6% in the first quarter of the year. According to data from the Bureau of Economic Analysis, GDP increased 2.6% in the third quarter, following a 0.6% decrease during the second quarter. Orion Advisor Solutions chief investment officer Tim Holland told Forbes earlier this fall “we have a hard time believing the economy is in recession today.”

Big Number

51%. That’s the share of corporate executives that have implemented or plan to implement job cuts, according to a recent PricewaterhouseCoopers survey of 722 executives. In addition to laying off employees, 52% of respondents said they’ve made hiring freezes or plan to.

Tangent

Nearly 50% of Twitter employees could be let go, multiple outlets reported Thursday, one week after billionaire Elon Musk completed his $44 billion acquisition of the social media giant. Sources at the company said roughly 3,700 of the company’s 7,500 employees could be laid off, Bloomberg and the Financial Times reported, although previous reports indicated Musk could be planning on cutting 25% or as much as 75% of its workforce—Musk, however, called that original number inaccurate.