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Layoffs roiling the tech sector were the biggest economic story of 2023.
And now those layoffs appear to be spreading to new corners of Corporate America.
On Tuesday morning, 3M ( MMM ) announced it would cut 2,500 manufacturing jobs as slower-than-expected growth came from what the company called “a rapid decline in consumer-facing markets — a dynamic that accelerated in December — along with significant China’s slowdown due to COVID-related disruptions.”
The news from 3M follows Monday’s announcement by Newell Brands ( NVL ) that the Sharpie maker will lay off 13% of its office staff.
With so many stories of layoffs in the headlines, it has become increasingly challenging for investors and the general public to take credit for official data showing that employment 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 suggests that executive management’s comfort with announcing staff cuts continues to grow in this environment.
Still, the US economy added 223,000 jobs in December. The unemployment rate is at its lowest level in the last 40 years. Last week, just 190,000 workers filed for unemployment insurance, the least in the past four months.
“The increasing layoffs in the technology sector do not appear to be affecting the broader labor market, as these workers are easily absorbed elsewhere,” Bob Schwartz, senior economist at Oxford Economics, wrote in a note to clients last week.
And, of course, the scale of these layoffs is important — according to S&P Capital IK, 3M employs 95,000 people. Newell, for its part, employs 32,000 people, according to S&P Capital IK.
Newell’s cuts are slightly deeper than 3M. Notably, Newell said these cuts would be for office workers, not manufacturing or other parts of the business.
So while Nevell CEO Ravi Saligram said it would “partially mitigate the impact of macroeconomic pressures on the business,” the company’s announcement was heavy on the consultant’s language — “nimble,” “agile” and “optimizing” in all appearances.
This is, through and through, a corporate restructuring.
And regardless of the economic environment, some companies are always looking to restructure their operations and, in turn, reduce the number of employees.
Moreover, this week’s non-tech cuts come at a time when pockets of the economy are still struggling with staffing shortages.
As 3M CFO Monish Patolawalla said on a call with analysts on Tuesday, the nursing workforce shortage continues to weigh on the medical system. For 3M, that meant slower growth in the medical solutions segment in the fourth quarter due to fewer elective procedures.
In some ways, these extraordinary shortages likely make it harder for executive teams to decide that the time is right to lay off staff. After all, there is still a high demand for workers. Just maybe not for your role.
So as layoff announcements continue to trickle through corporate earnings season over the next few weeks, the line Coinbase ( COIN ) CEO Brian Armstrong used in announcing his own company’s downsizing earlier this month continues to stand out.
“Over the past 10 years, we, along with most technology companies, have become too focused on employee growth as a measure of success,” Armstrong wrote. “Especially in this economic environment, it is important that we shift our focus to operational efficiency.”
The challenges facing a company like Coinbase, which sits at the center of an emerging, emotionally driven market, and 3M or Newell, which make things like notebooks, glue, and gauze—among thousands of other products in hundreds of end markets—in many ways I couldn’t be more different.
But the group of publicly traded companies in this country that are subject to share price and shareholder pressures is not large.
And the set of decisions these leadership teams face around hiring, firing and acquisition often seem more similar than different.
So when one CEO says the time is right “to shift our focus to operational efficiency,” many others will follow suit. How far that message travels will be one of the stories of the year.
What to watch today
Tesla (TSLA), Abbott Laboratories (ABT), AT&T (T), Nasdaq (NDAK), Boeing (BA), Ethan Allen (ETD), Kimberly-Clark (KMB), Lending Club (LC), Levi Strauss (LEFT), Progressive (PGR), Steel Dynamics (STLD)
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