In corporate America, layoffs have spread from tech to conglomerates

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Wednesday, January 25, 2023

By today’s newsletter Myles Udland, Head of News at Yahoo Finance. Follow him on Twitter @MylesUdland and continues LinkedIn. Read this and more market news on the go Yahoo Finance Software.

Layoffs rocking the tech sector were the biggest economic story of 2023.

Now, it seems, these layoffs are spreading to new corners of Corporate America.

3M ( MMM ) announced Tuesday morning that it will cut 2,500 manufacturing jobs as slower-than-expected growth comes from what the company called “sharp declines in consumer markets — a dynamic that accelerated in December.” China due to COVID-related disruptions.”

The news from 3M follows Monday’s announcement by Newell Brands ( NWL ) that the Sharpie maker will cut 13% of its office workforce.

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

With so many stories of layoffs in the headlines, it has become increasingly difficult for investors and the broader public to square official data showing that hiring remains robust.

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

This week’s news offers some relief to executives as layoffs continue to grow in this environment.

Still, the U.S. economy added 223,000 jobs in December. The unemployment rate is at its lowest level in 40 years. Only 190,000 workers filed for unemployment benefits last week, the fewest in four months.

“The rise in layoffs in the tech sector is not boosting the broader labor market because those workers are easily absorbed elsewhere,” Bob Schwartz, chief economist at Oxford Economics, said in a note to clients last week.

And of course, the scale of those layoffs is significant—3M employs 95,000 people, according to S&P Capital IQ. Newell, for its part, employs 32,000 people, according to S&P Capital IQ.

Newell’s cuts are slightly deeper than 3M’s. Notably, Newell said the layoffs would be for office workers, not manufacturing or other parts of the business.

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

This is a corporate restructuring.

Regardless of the economic environment, some companies are always looking to restructure their business and in turn downsize.

Moreover, this week’s non-technical layoffs come at a time when pockets of the economy are still struggling with staffing. shortcomings.

The nursing workforce shortage continues to affect the health care system, 3M CFO Monish Patolawala said on a call with analysts on Tuesday. For 3M, that meant slower growth in its medical solutions segment in the fourth quarter due to fewer elective procedures.

In some ways, these unexpected shortages are likely to harden executive teams’ decision that it’s time to downsize. After all, there is still a lot of demand for workers. Maybe not for your full role.

As layoff announcements continue to roll in during corporate earnings season over the next few weeks, the line used by Coinbase ( COIN ) CEO Brian Armstrong when he announced his company’s layoffs earlier this month continues to garner attention.

“Over the past 10 years, we, along with most tech companies, have focused heavily on employee growth as a measure of success,” Armstrong wrote. “Especially in this economic environment, it’s important to focus on operational efficiency.”

The paths faced by a company like Coinbase, which sits at the heart of a nascent, emotionally driven market, and a company like 3M or Newell, which makes things like notebooks, glue and gauze among hundreds of thousands of other products in end markets, could not be more different.

However, the size of publicly traded businesses in this country, subject to pressure from stock prices and shareholders, is not very large.

And the decisions facing these leadership teams about hiring, firing, and acquisition often seem more similar than different.

So when one CEO says it’s time to “focus on operational efficiency,” more will follow. How far that message goes will be one of the stories of the year.

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