Reports indicate that Tesla may lay off 10% of its workforce. The reason for this is that CEO Elon Musk believes the economy is in for a fall. He should know. He sees Tesla’s numbers every day, from around the world, but particularly in the United States and China.
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If the layoffs happen, Tesla will join a long line of companies with layoffs or frozen hiring. Consider that some hot tech firms have announced they will cut headcount by as much as 20%.
Vice, On Deck, Mainstreet and Cameo have each cut 20% of their workforces. Fintech company Better has downsized by 50%. Much larger companies Peloton and Netflix also have made substantial cuts.
Are the cuts due to flawed business models, growth that was too fast or indications that the economy has started to crater? If it is the economy, it should send shudders down the spines of countless other companies. Unemployment nationwide has fallen to an extremely low 3.6%. The period of full employment soon may end.
ADP’s monthly jobs report is generally a good measure of the national jobs situation. Its research shows that companies added only 128,000 jobs in May. That was against a consensus number of 300,000. Nela Richardson, the chief economist at ADP, commented: “The job growth rate of hiring has tempered across all industries, while small businesses remain a source of concern as they struggle to keep up with larger firms that have been booming as of late.” Small businesses generally lack the access to capital that larger companies have. Therefore, they tend to worry about job expenses sooner and are more likely to do something about it.
Inflation has been blamed for some layoffs. Companies find the costs of goods sold or services rendered have increased sharply. Consumer and producer price index numbers have run close to the 10% mark. Less than a year ago, it was unlikely that any company expected this.
If rising numbers of chief executives are worried, everyone else should be.
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