Massive Meta Layoff – Is the labor market finally starting to crack?

Last night it was announced that Meta (Facebook) was cutting 11,000 employees, reducing their total staff by 13%. This continues a worrying trend of large-scale tech company job cuts that could be a signal of what is to come for the broader employment market.

On Monday, we discussed the most recent non-farm payroll data release, which saw a somewhat confounding mix of increased unemployment coupled with an increase in job openings. Today, the numbers are a lot more one-sided, as industry wide layoffs are finally coming home to roost.  

For example, this upcoming quarter will be the first time in Facebook’s history (since 2005) that they will have a reduction in their number of employees. The tide is most definitely turning.

Interestingly, Meta’s stock price went up by 3% to $99 during premarket trading, a clear sign that market participants believe cutting employee costs is the most appropriate financial decision large companies can make within the confides of the current overly difficult economic conditions. Meta closed the trading day up over 5%, priced at roughly $101.

Meta was not the only influential tech firm to announce significant layoffs today. Online real estate brokerage firm Redfin announced a similar 13% staff reduction. The past month alone, we have seen substantial layoffs from all areas of the tech industry.

A Common theme between the above companies is that the vast majority saw significantly increased revenue during the Covid lockdown period in 2020, and made the mistake to expect that growth to continue, causing them to over hire in accordance with their inflated market expectations.

Meta also announced further cost cutting moves including reducing office space, desk sharing, and an extended a hiring freeze through the first quarter of next year.

While the first two protective measures might involve more virtue signalling than tangible improvements, the latter is quite significant, as it implies that over the next 6 months (at a minimum) Meta expects that their revenue to see a further decline or at the very least a distinct lack of growth.  

Apple and Amazon announced similar hiring freezes this month too. These companies are clearly preparing for the global economic pain to continue, which makes sense given that unlike the non-farm payroll data or unemployment figures previously mentioned, these hiring freezers are forward looking economic indicators. Effectively, they provide a sneak preview into future economic conditions, what the data will eventually reflect in 3-6 months. And as of this moment, that sneak preview is not looking too good.

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