Amazon the Latest in Huge Tech Layoffs, Just the Start or A Healthy Rationalization?

In this down cycle of the economy, more specifically the growth sector, technology has been particularly hit. These companies were some of the most to benefit from the low interest rates, work from home, no fear bull market. It stands to reason when that sector falls apart with the dramatic rise in interest rates. This week it was announced Amazon plans to lay off approximately 10,000 people in corporate and technology jobs as soon as this week. This would be the largest job cuts in the company’s history. We have already seen cuts from Twitter, Meta, Lyft, Stripe, Snap and other tech firms.

Amazon Slashing Workers

For Amazon the cuts will focus on Amazon’s devices segment. This includes the voice-assistant Alexa, as well as at its retail division and in human resources, said the sources who spoke on condition of anonymity because they were not authorized to speak publicly.

If the total number of layoffs is around 10,000 it would represent roughly 3 percent of Amazon’s corporate employees and less than 1 percent of its global work force of more than 1.5 million. Most of these are hourly workers.

What is significant is the timing from Amazon’s planned retrenchments. They come at what is traditionally the busiest time of the year for AMZN the holiday shopping season. The move underscores how quickly the pressure has mounted taking the luxury away from overstaffed or underdelivering segments.

Tech Slashing Across the Board

Amazon was the latest company with large job cuts. We have had the much talked about cuts at Twitter. Elon Musk wasted no time in halving Twitter’s head count this month after buying the company. Meta, the parent company of Facebook and Instagram, cut even more than Amazon, laying off 11,000 employees, about 13 percent of its work force. Lyft, Stripe, Snap and other tech firms have also laid off workers in recent months.

The question going forward is this the start of failing businesses cutting workers or the rationalization needed to cut the bloated from the ramped bull market. Rationality got thrown away in this up cycle, probably the $32 billion fraud and implosion at FTX the best example of the largess that hit the technology world, devoid of logic.

Can growth survive interest rates up here? Though we have seen inflation mellowing in both CPI and PPI these past weeks, they still are at significant growth impacting levels.

This story is just unfolding, keep your eyes wide open.

Source: TC, Reuters, Bloomberg

From The Traders Community Research Desk