Corporate Layoffs Spread Beyond High-Growth Tech Giants

Dow Inc., International Business Machines Corp. and SAP SE announced plans to cut thousands of jobs to prepare for a darkening economic outlook, as the current wave of corporate layoffs spreads beyond high-growth technology companies.

Together with layoffs announced by manufacturer 3M Co. this week, these companies are trimming more than 10,000 jobs, just a fraction of their total workforces. Still, the decisions mark a shift in sentiment inside executive suites, where many leaders have been holding on to workers after struggling to hire and retain them in recent years when the pandemic disrupted workplaces.

Unlike Microsoft Corp. and Google parent Alphabet Inc., which announced larger layoffs this month, these companies haven’t expanded their workforces dramatically during the pandemic. Instead, the leaders of these global giants said they were shrinking to adjust to slowing growth, or responding to weaker demand for their products.

“We are taking these actions to further optimise our cost structure,” Jim Fitterling, Dow chief executive, said in announcing the cuts, noting the company was navigating “macro uncertainties and challenging energy markets, particularly in Europe.”

The U.S. job market remains historically tight, with unemployment in December at 3.5% matching multi decade lows. The number of job openings still far outpaces the number of people looking for work. The Federal Reserve has been raising interest rates to tame growth and combat high inflation. But CEOs say many companies are beginning to scrutinise hiring more closely.

Slower hiring has already lengthened the time it takes Americans to land a new job. In December, 826,000 unemployed workers had been out of a job for about 3½ to 6 months, up from 526,000 in April 2022, according to the Labor Department.

“Employers are hovering with their feet above the brake. They’re more cautious. They’re more precise in their hiring,” said Jonas Prising, chief executive of ManpowerGroup Inc., a provider of temporary workers. “But they’ve not stopped hiring.”

Additional signs of a cooling economy emerged on Thursday when the Commerce Department said U.S. gross domestic product growth slowed to a 2.9% annual rate in the fourth quarter, down from a 3.2% annual rate in the third quarter.

Not all companies are in layoff mode. Walmart Inc., the country’s biggest private employer, said this week it was raising its starting wages for hourly U.S. workers to $14 from $12, amid a still tight job market for front line workers. Chipotle Mexican Grill Inc. said Thursday it plans to hire 15,000 new employees to work in its restaurants, while plane maker Airbus SE said it is recruiting over 13,000 new staffers this year. Airbus said 9,000 of the new jobs would be based in Europe with the rest spread among the U.S., China and elsewhere.

General Electric Co., which slashed thousands of aerospace workers in 2020 and is currently laying off 2,000 workers from its wind turbine business, is hiring in other areas. “If you know any welders or machinists, send them my way,” Chief Executive Larry Culp said this week.

Annette Clayton, CEO of North American operations at Schneider Electric SE, a Europe-headquartered energy-management and automation company, said the U.S. needs far more electricians to install electric-vehicle chargers and perform other tasks. “The shortage of electricians is very, very important for us,” she said.

Railroad CSX Corp. told investors on Wednesday that after sustained effort, it had reached its goal of about 7,000 train and engine employees around the beginning of the year, but plans to hire several hundred more people in those roles to serve as a cushion and to accommodate attrition that remains higher than the company would like.

Freeport-McMoRan Inc. executives said Wednesday they expect U.S. labor shortages to continue to crimp production at the mining giant. The company has about 1,300 job openings in a U.S. workforce of about 10,000 to 12,000, and many of its domestic workers are new and need training and experience to match prior expertise, President Kathleen Quirk told analysts.

“We could have in 2022 produced more if we were fully staffed, and I believe that is the case again this year,” Ms. Quirk said.

The latest layoffs are modest relative to the size of these companies. For example, IBM’s plan to eliminate about 3,900 roles would amount to a 1.4% reduction in its head count of 280,000, according to its latest annual report.

The planned 3,000 job cuts at SAP affect about 2.5% of the business-software maker’s global workforce. Finance chief Luka Mucic said the job cuts would be spread across the company’s geographic footprint, with most of them happening outside its home base in Germany. “The purpose is to further focus on strategic growth areas,” Mr. Mucic said. The company employed around 111,015 people on average last year.

Chemicals giant Dow said on Thursday it was trimming about 2,000 employees. The Midland, Mich., company said it currently employs about 37,800 people. Executives said they were targeting $1 billion in cost cuts this year and shutting down some assets to align spending with the macroeconomic environment.

3M, which had about 95,000 employees at the end of 2021, cited weakening consumer demand for its plans to eliminate 2,500 manufacturing jobs. The maker of Scotch tape, Post-it Notes and thousands of other industrial and consumer products said it expects lower sales and profit in 2023.

“We’re looking at everything that we do as we manage through the challenges that we’re facing in the end markets,” 3M Chief Executive Mike Roman said during an earnings conference call. “We expect the demand trends we saw in December to extend through the first half of 2023.”

Some companies still hiring now say the job cuts across the economy are making it easier to find qualified candidates. “We’ve got the pick of the litter,” said Bill McDermott, CEO of business-software provider ServiceNow Inc. “We have so many applicants.”

At Honeywell International Inc., CEO Darius Adamczyk said the job market remains competitive. With the layoffs in technology, though, Mr. Adamczyk said he anticipated that the labor market would likely soften, potentially also expanding the applicants Honeywell could attract.

“We’re probably going to be even more selective than we were before because we’re going to have a broader pool to draw from,” he said.

Across the corporate sphere, many of the layoffs happening now are still small relative to the size of the organisations, said Denis Machuel, CEO of global staffing firm Adecco Group AG.

“I would qualify it more as a recalibration of the workforce than deep cuts,” Mr. Machuel said. “They are adjusting, but they are not cutting the muscle.”

Former New Hampshire Gov. Chris Sununu delivered a warning to Treasury Secretary Scott Bessent during a recent visit to Washington: Already-high airfares will surge if the war in Iran doesn’t end soon.

Sununu, a Republican who represents some of the biggest airlines as president of the industry group Airlines for America, has for weeks sounded the alarm to Trump administration officials about the economic fallout from high jet fuel prices. The war, Sununu has argued, must come to a close soon, or things will get worse.

Administration officials have gotten the message.

Privately, President Trump’s advisers are increasingly worried that Republicans will pay a political price for the rising fuel costs, according to people familiar with the matter. Many of those advisers are eager to end the war, hoping prices will begin to moderate before November’s midterm elections.

The fallout from the U.S.-Israeli attack in late February has slowed traffic through the Strait of Hormuz, a vital shipping lane, triggering a sharp increase in oil, gasoline and jet-fuel prices.

That means consumers are grappling with high costs ahead of the summer travel season, as they consider vacation plans.

Sixty-three per cent of Americans said they put a great deal or a good amount of blame on Trump for the increase in gas prices, according to a new poll conducted by NPR, PBS and Marist.

More than 8 in 10 Americans said struggles at the gas pump are putting strain on their finances.

Jet-fuel prices roughly doubled in a matter of weeks after the war began, and they have remained high. Airlines have said that will add billions of dollars of additional expenses this year, squeezing profit margins.

U.S. airlines spent more than $5 billion on fuel in March—up 30% from a year earlier, according to government data.

Carriers have been raising ticket prices, hoping to pass the cost along to consumers, and they are culling flights that will no longer make money at higher price levels.

In March, the price of a U.S. domestic round-trip economy ticket rose 21% from a year earlier to $570, according to Airlines Reporting Corp., which tracks travel-agency sales.

So far, airlines have said the higher fares haven’t deterred bookings and they are hoping to recoup more of the fuel-cost increases as the year goes on.

Earlier this week, Trump said the current price of oil is “a very small price to pay for getting rid of a nuclear weapon from people that are really mentally deranged.”

Secretary of State Marco Rubio told reporters that if Iran got a nuclear weapon, the country would have more leverage to keep the strait closed and “make our gas prices like $9 a gallon or $8 a gallon.”

Trump has taken steps in recent days to bring the war to an end. Late Tuesday, the president paused a plan to help guide trapped commercial ships out of the Strait of Hormuz, expressing optimism that a deal could be reached with Iran to end the conflict.

Crude oil prices fell below $100 a barrel on Wednesday, after reports that Iran and the U.S. are working with mediators on a one-page framework to restart negotiations aimed at ending the conflict and opening the strait.

Sununu said Trump administration officials are conscious of the economic fallout from the war: “They get it…and I think that’s why they’re trying to get through the war as fast as they can.”

But he cautioned that it could take months for prices to return to prewar levels.

“Ticket prices won’t go down immediately” after the strait is fully reopened, Sununu said. “You’re looking at elevated ticket prices through the summer and fall because it takes a while for the prices to go down.”

Since the initial U.S.-Israeli attack in late February, Sununu has met in Washington with National Economic Council Director Kevin Hassett, representatives from the Transportation Department and senior White House officials.

A White House official confirmed that Hassett and Sununu have discussed the effect of increased fuel prices on the airline industry. The official said the conversation touched on how the industry can mitigate the impact of high jet fuel prices on consumers.

“The president and his entire energy team anticipated these short-term disruptions to the global energy markets from Operation Epic Fury and had a plan prepared to mitigate these disruptions,” White House spokeswoman Taylor Rogers said, pointing to the administration’s decision to waive a century-old shipping law in a bid to lower the cost of moving oil.

Rogers said the administration is working with industry representatives to “address their concerns, explore potential actions, and inform the president’s policy decisions.”

A Treasury Department spokesman pointed to Bessent’s recent comments on Fox News that the U.S. economy remains strong despite price increases. The spokesman said Treasury officials have met with airline executives, who have reaffirmed strong ticket bookings.

“We’re cognizant that this short-term move up in prices is affecting the American people, but I am also confident, on the other side of this, prices will come down very quickly,” Bessent told Fox News on Monday.

The war has already contributed to one casualty in the industry: Spirit Airlines. Company representatives have said they were forced to close the airline because the sustained surge in jet-fuel prices derailed the company’s plan to emerge from chapter 11 bankruptcy.

The Trump administration and Spirit failed to come to an agreement for the company to receive a financial lifeline of as much as $500 million from the federal government.

Transportation Secretary Sean Duffy has argued that the Iran war wasn’t the cause of Spirit’s demise, pointing to the company’s past financial struggles, as well as the Biden administration’s decision to challenge a merger with JetBlue.

Other budget airlines have also turned to the federal government for help since the U.S.-Israeli attack. A group of budget airlines last month sought $2.5 billion in financial assistance to offset higher fuel costs, and they separately wrote to lawmakers asking for relief from certain ticket taxes.

Corporate Layoffs Spread Beyond High-Growth Tech Giants

Dow, IBM and SAP say they will lay off thousands of workers as belt-tightening becomes the new business priority

Administration officials have spoken to the airline industry, which has voiced concerns about the rising costs.