The week in business: Creeping layoffs
How are you? (January 22-28)
Job cuts, not just in tech
What began as a wave of ominous job cuts at tech companies is spreading to other industries, most recently media and retail. In the last week alone, layoffs or reports of impending layoffs have flooded the Washington Post, Vox and Saks.com. Adding to the tens of thousands of unemployed tech workers, Spotify said Monday it was shedding 6 percent of its workforce, or about 600 employees, and IBM announced Wednesday it would lay off 3,900. Tech’s challenges may be a little specific to the sector — employers have largely pointed to over-hiring during the pandemic as the reason for recent cuts — but its upheaval can be an indicator of where the economy is headed. But even if layoffs seem to be creeping through the labor market, overall jobless claims remain low and millions of jobs are open across the country.
A growing economy
Despite seemingly obvious harbingers of an economic slowdown – such as mass layoffs – there are other signs of relative health. Take gross domestic product, an indicator that wasn’t that reliable at the start of the pandemic but has since normalized. The latest inflation-adjusted GDP report shows that the US economy grew at an annual rate of 2.9 percent in the fourth quarter of 2022, suggesting it has been broadly resilient amid inflation, high interest rates and war in Ukraine. Although just a few months ago GDP figures met a standard for defining a recession, the latest data seem to allay fears. But only to a certain extent – Many economists expect a recession to begin this year.
Elon Musk takes a stand
More than four years after he posted a tweet telling his followers that he had secured funding for Tesla’s privatization, Elon Musk, now CEO of Tesla and Twitter, appeared in court to challenge that statement against a to defend a lawsuit. He gave seven hours of testimony over three days, arguing that funding for a deal with Saudi Arabia’s sovereign wealth fund was ample, but dodged a question as to whether a specific dollar amount had been discussed. In the 2018 tweet, Mr. Musk hinted that he’d secured $420 a share (a billionaire favorite). Lawyers for the plaintiffs, a group of Tesla investors, are trying to build a case to prove Mr Musk’s actions caused Tesla stock to skyrocket, causing them to lose money. Some pundits believe they’re likely to succeed: Last year, the senior US district judge hearing the case, agreeing with the plaintiffs, ruled that Mr Musk was, in the words of investors, “willfully reckless” when he posted the tweet.
What’s next? (January 29 to February 4)
A smaller rate increase?
The Federal Reserve took its first step in slowing rate hikes last month when it broke a series of aggressive three-quarter-point hikes with a half-point hike. At Tuesday’s meeting, the central bank could decide to slow the pace further. In recent weeks, Fed officials, including Susan M. Collins, Chair of the Federal Reserve Bank of Boston, and Christopher Waller, a Fed Governor, have discussed the possibility of a quarter-point move. “There seems to be little turbulence, so I prefer a 25 basis point hike right now,” said Mr. Waller. But he echoed his colleagues in stressing that their anti-inflation campaign is not over, and Fed Chair Jerome H. Powell has made clear officials’ intention to raise interest rates to 5% by the end of the year. raise 1 percent.