Companies Are Still Cutting White-Collar Jobs
Jan 13, 2024
Employers
from Amazon to BlackRock show a continued push to do more with less
After a year of right-sizing,
employers are looking in the mirror and concluding there is still fat to
lose.
Companies including Amazon, Citigroup, Xerox XRX , Google and BlackRock this
month have
announced plans to trim their workforces. Some of the companies now
cutting jobs conducted larger-scale layoffs over the past year or so. Since
then, inflation has come down along
with expectations for a recession, which most economists anticipated as
recently as the middle of last year.
What hasn’t changed, according to the steady drumbeat of layoff
news in the first two weeks of January, is American corporations’ focus on efficiency and commitment to do more with
less.
In messages announcing the layoffs, many executives stressed the
need for companies to be smaller. “I know many of you are wondering why this is
happening,” Dan Clancy, chief executive of streaming platform Twitch,
wrote in a memo
to staff, noting previous work to reduce costs at the company.
“Unfortunately, despite these efforts, it has become clear that our
organization is still meaningfully larger than it needs to be given the size of
our business.
Amazon, which owns Twitch, said this month that it was eliminating hundreds
of jobs across its film and television studio and the streaming
platform to rein in costs. Audible, an audiobook platform Amazon owns, is also
laying off 5% of its staff, according to an internal memo.
Citigroup
on Friday said it plans
to cut 20,000 jobs from its workforce by the end of 2026 as the bank
continues a multiyear restructuring.
Executives
and analysts say that beyond the budget-tightening that often happens at the
beginning of the calendar year, there is a growing sense that the work of
slimming down isn’t over. The emergence of artificial intelligence is
accelerating that push because AI can perform more of the tasks handled by
white-collar workers and because companies are diverting resources to develop
the technology. Corporate roles are
also being newly scrutinized following massive hiring sprees earlier
in the pandemic, with some executives still feeling companies went too far in
expanding their teams.
“It
seems like the layoffs we saw last year were the beginning of a process,”
said Nick Bunker, director of North American economic research at the jobs
platform Indeed.
By
several measures, the labor market is strong. The U.S. economy is
still producing jobs at a faster pace than it was just before the
pandemic, and unemployment is low. Many companies also are reluctant to get rid
of workers after struggling so long to find and keep them.
Still, the climate for job seekers is cooling. The Federal
Reserve’s campaign of interest-rate increases raised borrowing costs, prompting
businesses to scale back expansion plans. The household savings that powered
consumer spending in recent years have dwindled, pulling more people off the
sidelines and into the job hunt. Employers have slowed hiring and handed out
smaller raises. The job-hopping that reached a frenzied pace early in the
pandemic has quieted.
“It’s
a buyer’s market for talent right now,” said Aaron Terrazas, chief
economist at employee review website Glassdoor. The big tech companies can
recognize the talent market has radically shifted from a year ago, and they
aren’t going to struggle for talent, he said.
As
companies make investments in AI, they are looking for efficiencies elsewhere,
Terrazas added. High interest rates have made taking risks more expensive, he
said, so part of the cuts is about reallocating resources in a more targeted
way.
Companies kicked off the new year with a string of layoff
announcements.
Xerox
Holdings said it would
reduce its workforce by 15%. The printer maker had 20,500 employees at
the end of 2022, a reduction of about 12% compared with the previous year,
according to regulatory filings. Unity Software , a San Francisco-based maker of tools for creating
videogames and other applications, said it plans to lay off about 25% of its
workforce, or about 1,800 employees.
Google laid
off hundreds of employees across multiple divisions on Wednesday, as
it works to reduce costs and direct resources toward developments in AI. The
cuts affected employees working in divisions such as Google’s Assistant
program, hardware and internal software tools.
Universal
Music Group plans to lay off around 100 to 300
employees globally this year, according to a person familiar with the matter.
Others hinted at new technologies on the horizon, poised to reshape
companies. When BlackRock CEO Larry Fink and President Rob
Kapito wrote a message to staff this week, noting the firm would cut 3% of
its roles, the executives said “new technologies are poised to transform our
industry—and every other industry.” The company said its overall workforce
would still likely be larger by the end of the year as it adds people to
support growth areas.
“We
are going to see more layoffs this year, but there will also be a spike in
hiring,” said Martha Heller, who runs a tech-focused executive-search
firm, Heller Search Associates. Heller added that for every morning she learns
of fresh layoffs, she heads into the office to extremely busy days, as
companies heighten their demand for hiring workers in areas like generative AI.
“Companies will keep hiring to acquire new skill sets,” she added.
Some
of the changes being made now also reflect seasonal corporate moves. It is
common for companies to cut 2% to 5% of roles in December and January, as
executives close out budgets and begin to plan for a new year, said Julia
Pollak, chief economist at the jobs website ZipRecruiter. But some
industries, including tech, have had an employment
slowdown for months.
“The tech-cession is not over,” Pollak said. “There’s no steady
improvement happening yet.”
Many
companies are also finding it harder to pass along increased labor costs to
consumers in the form of higher prices, a reason why some executives are
looking to trim workers now, said Andy Challenger, senior vice president
at Challenger, Gray & Christmas, an outplacement firm.
Among the roles being targeted are those in human resources—if
employers plan to do less hiring in 2024—as well as some in underperforming
divisions at each company seen as less relevant to the future. Many employers,
particularly in tech, went on hiring sprees in 2021 and 2022 and are now
concluding that their organizations remain bloated.
After
the messaging app Discord said it would cut 17% of its staff this week, or
about 170 people, CEO Jason Citron said the company needed to face
hard truths.
“We
grew quickly and expanded our workforce even faster, increasing by 5x since
2020,” Citron wrote in an internal memo viewed by The Wall Street Journal. “As
a result, we took on more projects and became less efficient in how we
operated.”
The
Verge earlier reported the Discord cuts.
More
layoffs might be coming across American corporations, Challenger said, based on
his conversations with executives. Though leaders will likely not slash
positions across the board this year, more trims are likely.
“It’s
all about cost-cutting right now,” he said.
Source: Wall Street Journal