Business

Layoffs in Corporate America spread from technology to conglomerates

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Wednesday 25 January 2023

Today’s newsletter is at Myles Abroad, Head of News at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn. Read this and more market news on the go Yahoo Finance App.

Tech layoffs have been the biggest economic story in 2023.

And now it seems those layoffs are spreading to 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 called “rapid declines in consumer-facing markets — a dynamic that accelerated in December — along with significant slowdowns in China due to of COVID-related disorders.”

The news from 3M followed an announcement Monday from Newell Brands ( NWL ) that the Sharpie maker would cut 13% of its office staff.

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

With so many layoff-related stories in the headlines, it has become increasingly challenging for investors and the wider public to look at official data showing that hiring remains robust.

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

This week’s news suggests that management comfort with announcing staff reductions continues to grow in this environment.

Still, the U.S. economy added 223,000 jobs in December. Unemployment is at its lowest level in over 40 years. Last week, only 190,000 workers filed unemployment insurance claims, the fewest in four months.

“Mounting layoffs in the tech sector does not appear to lift the broader labor market as these workers are easily absorbed elsewhere,” Bob Schwartz, senior economist at Oxford Economics, wrote in a note to clients last week.

And of course, the scale of those job cuts 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’s cut is slightly deeper than 3M’s. Notably, Newell said those reductions would be for office workers, not for manufacturing or other parts of the company.

So while Newell’s chief executive Ravi Saligram said it would “partially help offset the impact of macroeconomic pressures on the business”, the company’s announcement was heavy on consultant-forward language – “agile”, “agile” and “optimize” all appearances. .

This is through and through a corporate restructuring.

And regardless of the economic environment, some companies are always looking to restructure their business and in turn reduce the number of employees.

Also, this week’s non-tech cuts come at a time when pockets of the economy are still struggling with staffing lack.

As 3M CFO Monish Patolawala said on a call with analysts on Tuesday, a labor shortage for nurses continues to weigh on the medical system. For 3M, that meant slower growth in the medical solutions segment in the fourth quarter due to fewer elective procedures.

In some ways, this outstanding shortage likely hardens the management team’s decision that the time has come to cut staff. After all, there is still plenty of demand for workers. Just maybe not for your particular role.

So as layoff announcements continue to roll through the company’s earnings season for the next few weeks, a line used by Coinbase ( COIN ) CEO Brian Armstrong to announce his own company’s layoffs earlier this month continues to stand out.

“Over the past 10 years, we, along with most technology companies, have become too focused on growing 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 for a company like Coinbase, which is at the center of a nascent, emotionally driven market, and 3M or Newell, which makes things like notebooks, glue and gauze—among thousands of other products across hundreds of end markets—in many ways could not be more different.

But the pool of companies in this country that are publicly traded and subject to the pressure of their stock prices and shareholders is not very large.

And the decisions these leadership teams face around hiring, firing and acquisition are often more similar than they are different.

So when one CEO says the time has come to “shift our focus to operational efficiency,” many more will follow suit. How far that message goes will be one of the stories of the year.

What should you see today?

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