The painful cycle job cuts businesses around the world continues unabated amid fears the economy is on the brink of recession, although macroeconomic data shows strength remains.
The fallout from the war in Ukraine and aggressive interest rate hikes since last summer to rein in inflation have pushed up borrowing costs, adding to the burden on businesses, which are being asked to “redefine” themselves in the new financial environment. The need to cut costs has led to massive cuts, starting with the tech sector in 2022, which has suffered the biggest “bleed” from stock market sell-offs. Since the end of the previous year, however, until today, the layoffs have taken on a general character, affecting the whole economy.
The new standard
This is the new normal for the economy, in a very uncertain environment, as all scenarios remain open both on the economic and monetary policy front. While the return to normal after the pandemic is still in progress, companies are showing that it is difficult to cope “without blood” in the process of normalization.
The fact is that job cuts accelerated at the start of 2023, marking the worst start to the year since 2009, with 52,000 jobs lost in the first week of January alone. Throughout January, around 90,000 workers were laid off at 271 companies, according to data from layoffs.fyi. From October 1, 2022 to the end of April this year, companies around the world have cut more than 600,000 jobs, according to data from Bloomberg.
The tech sector accounted for a third of global layoffs, with Google, Amazon, Meta and Microsoft shedding 172,000 jobs over the same period. Immediately after technology, the consumer goods sector follows, with cuts of 110,000 jobs, and in third place the financial services sector, with layoffs of around 80,000 workers.
UBS’s plan to cut around 36,000 jobs, or 30% of its total workforce, following its takeover of Credit Suisse caused a stir, making the Swiss bank the group with the largest job cuts over the past of the last six months.
Worst in 2023
While tech companies announced massive layoffs last year, 2023 is looking much worse, with tech giants like Amazon, Meta, Microsoft, Google, IBM, SAP and Saleforce announcing sweeping job cuts. The problem is that the tech industry over-hired during the pandemic to meet the increased needs of remote working and e-commerce, and now that demand has waned, it’s facing declining revenues.
According to data from Layoffs.fyi, 669 tech companies laid off about 195,000 workers this year, up from about 200,000 last year. About 9,500 jobs were cut from startups this year between January and March, according to data from Careernet. In total, between January and April, U.S. companies announced plans to cut 337,411 jobs, a 322% increase from the 79,982 announced in the same period last year, according to data from Challenger, Gray & Christmas. It is the highest figure since 2020, when more than a million job cuts were announced during the same period. Excluding 2020, this is the highest number since 2009.
In Europe, job cuts this year have reached around 100,000 jobs in the automotive industry, including Volvo and Stellantis, food, retail and consumer goods, industrial and engineering applications and technology. A few days ago, two major telecommunications groups, BT and Vodafone, announced 66,000 job cuts. In the United States, business bankruptcies in the January-April quarter reached 236 – the highest number in a four-month period since 2010, according to data from S&P Global.
A temporary phenomenon?
The question now is whether this is a temporary phenomenon or something that will last for a long time. Given the recent disappointing productivity and automation trends in the age of ChatGPT, chances are this is just the beginning.
Monetary policy on both sides of the Atlantic will also play an important role if central banks intend to end the current tightening cycle soon. According to a study by the International Monetary Fund (IMF), digitalization has led to the adoption of key technologies, but has not given a boost to increased investment, which is an important factor in improving the business environment. business.