From layoffs to hiring freezes, here's how companies like Amazon and Walmart are preparing for what could be a 'seismic shift' coming to the economy
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- Talk of a coming recession has some people spooked.
- While the economy is still looking pretty good, some companies already seem to be scaling back.
- From hiring freezes to cancelling offsites to layoffs, they're signaling expectations of a downturn.
While a recession hasn't arrived yet, there's no doubt the chatter about when one will hit has ramped up.
After a robust year of economic recovery when Americans spent big and there were more than enough jobs to go around, companies seem to be tightening their belts. To be sure, experts have told Insider that the next recession will be much milder and feel very different than the pandemic recession or the 2008 housing-bubble collapse and financial crisis.
Still, companies from Meta to Walmart have given signals in recent weeks that they are bracing for a downturn.
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Facebook's parent company has instituted a hiring freeze, Insider's Rob Price and Kali Hays first reported. The freeze will extend through the year.
In an internal memo that Insider viewed, Facebook's CFO David Wehner attributed the freeze and the issues the company was facing to an "industry-wide downturn," as well as the invasion of Ukraine and changes to data privacy.
It's a rare move for the company, and one that hasn't been seen since the onset of the pandemic.
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Netflix is already on its second round of layoffs in just over a month. On Tuesday, the streamer laid-off about 150 people across its divisions.
"These changes are primarily driven by business needs rather than individual performance," Netflix said in a statement. That makes the cuts "especially tough."
It comes after Netflix laid off almost a dozen contracted workers from Tudu, its editorial fan site, in early April. During that round of layoffs, the company cut loose a total of 25 workers from its marketing arm.
And it's not the only one, Insider's Ben Gilbert and Avery Hartmans are tracking all the companies experiencing layoffs from Carvana to Wells Fargo.
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Insider's Paayal Zaveri reported that, according to an internal memo, the firm was slowing down hiring. It comes after Salesforce hired thousands of workers in 2021; Insider's Catherine Henderson and Alex Nicoll reported in January that Salesforce was hiring for 1,700 roles in the US.
Per the internal memo, Salesforce was also cancelling some upcoming offsites.
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Bloomberg reported that the e-commerce furniture company Wayfair will freeze hiring for 90 days.
A spokesperson told Bloomberg that Wayfair sees "a great deal of uncertainty in the overall economy," even as it's in a "strong position."
During the pandemic, home decor sales skyrocketed, as Americans began to furnish their spaces into offices, home gyms, or just somewhere that they were happy to be spending all of their time in. Wayfair was no exception, with revenue increasing by 55% in 2020, according to Bloomberg.
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In a rare move, Amazon said that it hired too many workers.
The company said on its quarterly earnings call last month that it was overstaffed for the first four months of the year, a change of fate for the retailer, which was understaffed for much of the pandemic.
"As the [Omicron] 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," Amazon Chief Financial Officer Brian Olsavsky said during the company's call.
And that reduced productivity added roughly $2 billion in costs for the company, Olsavsky said.
AP
Like Amazon, Walmart says that it was also overstaffed during the first quarter of 2022, which has dented its profits.
Omicron affected Walmart like it did Amazon: Walmart had hired extra workers at the end of 2021 to cover for staff out on COVID leave, but when Omicron cases declined during the first half of the quarter, employees came back to work sooner than anticipated.
Walmart said that its profits declined 24.8% from last year and announced that it would cut its profit guidance for the full year — that is, a publicly traded corporation's prediction of its near-future profits or losses.
Reuters
Uber CEO Dara Khosrowshahi told employees in an email obtained by CNBC this month that "the market is experiencing a seismic shift and we need to react accordingly."
Tech stocks in particular have nosedived from their pandemic peak, and Uber posted almost $6 billion in losses in its first quarter this year.
In response, Khosrowshahi said that Uber will begin to treat hiring as a "privilege," signaling that a hiring slowdown — or even a freeze — is on the horizon for the rideshare company.
And Uber is looking to scale down on marketing as well, according to Khosrowshahi's note.
"We have to make sure our unit economics work before we go big," he said. "The least efficient marketing and incentive spend will be pulled back."
Emily Quiles
Twitter is freezing the majority of its hiring and backfilling as of this week while it waits for Elon Musk's potential $44 billion takeover, a spokesperson confirmed for Insider this month.
Other than its hiring shutdown, Bloomberg reported that CEO Parag Agrawal told employees that the company had not met goals related to making money and audience building.
And Agrawal asked two of its top leaders to leave — Kayvon Beykpour, head of consumer product, and Bruce Falck, in charge of revenue product. Both confirmed so in separate Twitter posts, with Beykpour writing that Agrawal "wants to take the team in a different direction."
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