- Over the last year, companies have been hiring at a rapid clip as workers job switch.
- But now, layoffs are brewing, and companies are letting go of some of their new workforce.
- Just as workers might have a “Great Regret” over quitting, companies regret some of their hiring.
When recession fears began to surface this spring, big companies like TikTok, Redfin, and JPMorgan wasted no time announcing layoffs and hiring freezes.
That’s because they realized they’d made a big mistake — they hired too many people.
In Walmart’s May earnings call, CEO Doug McMillon said the company’s “weeks of overstaffing” cut into profit. The company had previously hired an influx of new employees in 2021 to cover COVID-19 staff shortages.
It’s not the only one.
“I said we wouldn’t lay people off unless we had to. We have to,” Redfin CEO Glenn Kelman wrote in a blog post announcing that the firm was shedding 8% of its workfore. “A layoff is always an awful shock, especially when I’ve said that we’d go through heck to avoid one, and that we raised hundreds of millions of dollars so we wouldn’t have to shed people after just a few months of uncertainty. But mortgage rates increased faster than at any point in history.”
Now that the economy is slowing down due to due to inflation, the war in Ukraine, and waning consumer and investor confidence, companies across industries have already made cuts. It comes after a year of millions of workers quitting at near-record rates every month. Companies, banking on continued growth like they saw during the pandemic, were eager to hire them.
A wave of layoffs is sweeping the country as companies cut costs
In May alone, 2.8% of the workforce — 4.3 million people — handed in their resignation letters.
Companies were waiting in the wings: In June, the US added 372,000 payrolls, higher than economists surveyed by Bloomberg had been estimating. That comes after adding 384,000 payrolls in May, and 368,000 in April — all signs pointing to a robust jobs recovery.
For some workers, the Great Resignation has meant better conditions, higher wages, and even more flexibility. Indeed, a Pew Research Center survey from February 2022 found that 56% of Americans who quit in 2021 and found a new role are making more money.
But it’s still a more complicated picture: There’s a limit to how much power workers can actually get, and that’s by design in our labor market. In a country where there’s no guaranteed access to things like food, healthcare, and housing, workers still depend on companies to provide them with the income to afford those things — and companies know that.
Some workers are regretting making the jump. The regret may also go both ways, as the recent economic downturn doesn’t align with the growth businesses have been banking on.
Sure enough, a tsunami of layoffs has been sweeping the country. The firms eager to hire and poach are suddenly confronting a potential recession — and workers will bear the brunt of tightening budgets.
A number of high-profile companies have already made cuts, including Tesla, Gopuff, Re/Max, Coinbase, and Microsoft. Layoff rumors have plagued the banking world owing to sluggish growth and declining profits. Other firms, like Apple and Goldman Sachs, are kicking off hiring freezes, Fortune reported.
Reasons for the mass layoffs include skyrocketing labor costs and slowed growth across the economy.
In some instances, like in the case of JPMorgan‘s home-lending department, teams associated with now-struggling markets got the cut. In the case of other companies like TikTok or Coinbase, the layoffs were touted as a measure to keep the underlying business healthy.
According to the Harvard Business Review, layoffs have become an increasingly common occurrence in the US since the 1970s, and are often ordered in response to financial uncertainties.
For firms that want to hold on to their current workers, an economic slowdown might be good news — although not very beneficial for employees looking to earn more, or switch into a different role.
“Particularly if we’re forcing a slowdown, then employers aren’t going to be as desperate to find workers,” Elise Gould, a senior economist at the Economic Policy Institute, a left-leaning think tank, told Insider. “They may hold onto the workers that they have. But they may not have to work so hard to do that if there aren’t as many opportunities for workers.”