According to Layoffs.fyi's report on March 8, 2023, more than 126,000 employees have been laid off by 468 companies this year. Notable companies among them are Goldman Sachs, Amazon, Spotify, Google, DOW Inc, the Washington Post, and others. The frequent occurrence of layoff-related news headlines begs the question, what are the underlying reasons behind this surge in mass layoffs? In the following section, we delve into some of the driving factors.
Who is conducting layoffs?
There are a variety of businesses that have announced layoffs. Consider the following list:
Goldman Sachs: 3,200 employees according to Bloomberg (Natarajan, 2023)
Flexport: 640 employees, 20% of global workforce according to CNBC (León, 2023)
Amazon: 8,000 employees and 18,000 jobs according to CNBC (Novet, 2023)
Salesforce: 10% of personnel, 8,000 employees according to CNBC (Capoot, 2023)
Vimeo: 11% of workforce according to Mondo
Stitch Fix: 20% of workforce according to Mondo
DirectTV: 5-6% of workforce according to Mondo
Carvana: continuing to reduce workforce after last year’s layoffs according to the Wall Street Journal
Spotify: 6% of workforce, 600 employees according to CNBC (Browne, 2023)
Google: 6% of full-time workforce according to CNBC (Elias, 2023)
DOW Inc: 2,000 jobs globally according to InvestorPlace (MacDonald, 2023)
For a continually updated list of who is conducting layoffs, visit: www.layoffs.fyi
Who are they laying off?
The Wall Street Journal has dubbed the recent wave of layoffs as the "White-Collar Recession," citing the impact of rising interest rates and cost-cutting measures on this segment of the workforce (2023). While the pandemic led to significant job losses in blue-collar industries such as entertainment and hospitality, the current labor shortage has made it crucial for employers to retain their essential blue-collar workers. However, the post-pandemic environment and macroeconomic challenges have compelled companies to reconsider their strategies and find ways to reduce expenses (Wall Street Journal, 2023).
Goldman Sachs is a case in point, with Bloomberg reporting that over a third of the employees being laid off are expected to come from the firm's core banking and trading units (Natarajan, 2023). Similarly, CNBC notes that more than a quarter of the employees laid off by Google in the Bay Area held positions with "senior" or "director" titles (Elias, 2023).
Why are white-collar employees being laid off?
There are a variety of factors influencing these layoffs.
“A rising tide lifts most boats, but some boats require patching” - Todd Young
Pandemic overgrowth
A number of companies have cited overgrowth during the pandemic as a direct cause of the need for mass layoffs. Consider the following statements from CEOs conducting layoffs…
Flexport co-CEOs Ryan Petersen and Dave Clark stated, “Lower volumes, combined with improved efficiencies as a result of new organizational and operational structures, means we are overstaffed in a variety of roles across the company…” CNBC (León, 2023)
In 2022, Amazon CFO Brian Olsavsky stated, “As the variant subsided in the second half of the quarter and employees returned from leave, we quickly transitioned from being understaffed to being overstaffed, resulting in lower productivity.” Washington Post (Lerman, 2022). As of January of 2023, they are cutting 18,000 jobs according to CNBC (Novet, 2023).
Vox Media CEO Jim Bankoff stated, “We’re not able to sustain projects and areas of business that have not performed as anticipated, are less core to where we see the biggest opportunities in the coming years…” Axios (Fischer, 2023)
Salesforce CEO Marc Benioff, “As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing.” CNBC (Capoot, 2023).
As we navigate a post-pandemic landscape, customer desires and needs have evolved. Consequently, there is no longer a requirement for recruiting staff for products and services tailored specifically to pandemic-related circumstances.
Economic challenges
According to the Wall Street Journal, “rising interest rates, macroeconomic difficulties and changes in consumer habits are all economic contributors to the increased rates of layoffs.” Consider the following insights from the Deloitte Economic Update for January 23rd, 2023:
Gita Gopinath, International Monetary Fund Deputy Managing Director, stated “the fight against inflation is not over.”
“Inflation for nonfood and non-energy services continues to accelerate.”
While China is poised to reopen, economists suggest that this could “lead to an increase in global inflation.”
“For the second consecutive month, retail sales in the US declined from the previous month.”
The war in Ukraine is continuing.
There is still a shortage of labor in many industries due to many people remaining “absent from work because of the long-term effects of covid-19.”
“US growth in 2023 will be slower than in 2022 due to tightening monetary and fiscal policy. Yet a recession might be avoided due to declining energy prices, strong employment growth, and easing of supply chain stress. Still, a recession remains a possibility.” (Kalish, 2023).
The impact of inflation and supply chain challenges have changed consumer and business spending patterns. According to Garner, “as average selling prices rise, consumers are purchasing less or walking away with fewer items for the same amount of spend.” More than 30% of consumers are now “utilizing digital price comparison and coupon tracking tools” (Socha, 2022). Spending in areas such as advertising has also decreased. Consider the following projection from Axios for 2023:
Business leaders are feeling the brunt of these behavior changes. Consider the following quotes:
Flexport co-CEOs Ryan Petersen and Dave Clark stated, “...[we] are not immune to the macroeconomic downturn that has impacted businesses around the world. Our customers have been impacted by these challenging conditions, resulting in a reduction to our volume forecasts through 2023…” CNBC (León, 2023)
Salesforce CEO Marc Benioff stated, “...the environment remains challenging and our customers are taking a more measured approach to their purchasing decisions.” FoxBusiness (Genovese, 2023)
Spotify CEO Daniel Ek stated, “Like many other leaders, I hoped to sustain the strong tailwinds from the pandemic and believed that our broad global business and lower risk to the impact of a slowdown in ads would insulate us…In hindsight, I was too ambitious in investing ahead of our revenue growth. And for this reason, today, we are reducing our employee base by about 6% across the company” CNBC (Browne, 2023).
Neil Vogel, CEO of Dotdash Meredith, “[We] are not immune to the broader challenges of the ad industry and of the economy as a whole, and today’s actions are a derelict response to these realities… Like many businesses in our space, we have grown aggressively over the last few years… with the difficult market environment and economic uncertainty that lie ahead, we must prioritize our biggest opportunities…” Axios (Fischer, 2023)
Change of mindset in the workforce
The pandemic brought on a change of mindset in many employees in the workforce. Consider our previous insights article on the trend, “quiet quitting.” In 2022, Gallup warned that “employee engagement and well-being remain very low” and that this was holding back “enormous growth potential” (Gallup, 2022). Additionally during the pandemic, between April and September of 2021 alone, “more than 19 million US workers quit their jobs.” Many cite the desire for a sense of “shared identity,” the need to feel “valued,” flexibility, the desire for a “sense of belonging” and interpersonal relationships as primary reasons for looking for new employment (McKinsey & Co, 2021). While these changes in employee perceptions might not directly contribute to the need for layoffs, they might influence who is laid off in organizations where layoffs are necessary.
The main takeaway
The surge in mass layoffs has predominantly affected white-collar workers and can be attributed to various factors, including pandemic-related issues, economic challenges, and changing employee preferences during COVID-19. This trend of increasing layoffs serves as a warning for executive coaches to recognize the challenges their clients face. They should prepare appropriate resources, questions, and discussion topics about layoffs to assist executives in navigating the turbulent waters of downsizing. Furthermore, these layoffs can be an opportunity for business leaders to learn from the experiences of other companies within or adjacent to their industry and better understand the impact of economic difficulties.
“Learn from the stories of people who faced challenges you haven’t yet experienced…” - Joanna Barsh
References
Browne, R. (2023, January 24). Spotify cuts 6% of its workforce — read the memo CEO Daniel Ek sent to staff. CNBC. https://www.cnbc.com/2023/01/23/spotify-to-cut-6percent-of-its-workforce-as-tech-layoffs-continue.html.
Capoot, A. (2023, January 4). Salesforce is cutting 10% of its personnel, more than 7,000 employees. CNBC. https://www.cnbc.com/2023/01/04/salesforce-is-cutting-10percent-of-its-workforce-more-than-7000-employees.html.
De León, R. (2023, January 11). Flexport to lay off 20% of its global workforce. CNBC. https://www.cnbc.com/2023/01/11/flexport-to-lay-off-20percent-of-its-global-workforce.html.
Elias, J. (2023, January 25). Google job cuts hit 1,800 employees in California, including 27 massage therapists. CNBC. https://www.cnbc.com/2023/01/24/google-cut-over-1800-california-jobs-including-massage-therapists.html.
Fischer, S. (2023, January 26). Dotdash Meredith to lay off 7% of staff. Axios. https://www.axios.com/2023/01/26/dotdash-meredith-media-layoffs.
Fischer, S., & Flynn, K. (2022, December 6). Ad growth expected to slow further in 2023. Axios. https://www.axios.com/2022/12/06/advertising-revenue-growth-2023.
Foldy, B. (2023, January 13). Carvana Cuts Workers Amid Slowing Sales and Debt Squeeze. WSJ. https://www.wsj.com/articles/carvana-cuts-workers-amid-slowing-sales-and-debt-squeeze-11673568956.
Gallup, Inc. (2022, September 23). State of the Global Workplace Report - Gallup. Gallup.com. https://www.gallup.com/workplace/349484/state-of-the-global-workplace.aspx?thank-you-report-form=1#ite-393218.
Genovese, D. (2023, January 4). Salesforce to lay off 10% of workforce to cut costs amid economic downturn. Fox Business. https://www.foxbusiness.com/lifestyle/salesforce-lay-off-10-percent-workforce-cut-costs-amid-economic-downturn.
Lerman, R. (2022, May 5). Amazon’s new labor issue: What to do with too many workers. Washington Post. https://www.washingtonpost.com/technology/2022/05/05/amazon-warehouses-overstaffing/.
MacDonald, C. (2023, January 26). Dow Layoffs 2023: What to Know About the Latest DOW Job Cuts. InvestorPlace. https://investorplace.com/2023/01/dow-layoffs-2023-what-to-know-about-the-latest-dow-job-cuts/.
Mondo. (2023, February 1). Mass Layoffs in 2022 & 2023: What’s Next for Employees? Mondo Staffing Agency. https://mondo.com/insights/mass-layoffs-in-2022-whats-next-for-employees/#company-layoffs-2023.
Natarajan, S. (2023, January 9). Goldman to Cut About 3,200 Jobs This Week After Cost Review. Bloomberg.com. https://www.bloomberg.com/news/articles/2023-01-09/goldman-sachs-gs-to-cut-about-3-200-jobs-after-cost-review#xj4y7vzkg.
Novet, J. (2023, January 5). Amazon says it will cut over 18,000 jobs, more than initially planned. CNBC. https://www.cnbc.com/2023/01/04/amazon-says-it-will-cut-over-18000-jobs-more-than-initially-planned.html.
Socha, K. (2022). How Consumer Shopping Habits Are Changing in Response to Inflation. Gartner. https://www.gartner.com/en/articles/how-consumer-shopping-habits-are-changing-in-response-to-inflation.
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