16th November 2022
Bite-sized business news from the UK and beyond
- UK job market under strain
- Amazon set for largest layoffs in company history
UK job market under strain
Yesterday the Office of National Statistics revealed that the UK unemployment rate unexpectedly ticked higher to 3.6% in September from 3.5% the month before.
It’s another sign that the jobs market is cooling, and the economy is heading for a recession. ONS data also showed that:
- Job vacancies fell for the fifth month in a row as companies hold back on recruitment due to the growing economic concerns.
- Wages (excluding bonuses) grew by an annual rate of 5.7% the fastest growth since 2000, excluding the pandemic, when the end of furlough skewed figures. However it’s still short of the 10.1% inflation number which means workers are taking a real pay cut.
- The proportion of people neither working nor looking for work has risen again driven by the growing number of long term sick and early retirees. This is causing labour shortages with industries such as healthcare, retail and hospitality struggling to fill vacancies.
This leaves policymakers in a difficult position
In tomorrow’s eagerly anticipated Autumn Statement the government will announce a series of tax hikes and spending cuts in a bid to fix public finances. However it could potentially deepen an expected recession by squeezing household incomes further.
The Bank of England, already under pressure to bring price rises back to the target of 2%, fears a shrinking labour market will add to inflation pressures, forcing it to raise rates more aggressively thereby increasing the cost of borrowing for households.
The Bank expects rate of unemployment to peak at around 6.5% next year as it forecasts the longest recession since records began.
Other stories to keep you in the loop
- Company insolvencies jump by 38% in October
- Thomas Cook's Chinese owner in talks to sell stake
- Heinz tomato ketchup tops inflation survey of UK branded groceries
- Over a million are owed money by failed crypto exchange
- Major investor calls on Google owner to ‘aggressively’ cut staff and pay
- Sweet shops on Oxford Street ‘drop by third’ after raids and legal action
- Estée Lauder to buy luxury brand Tom Ford for $2.8bn
- America's biggest retailer Walmart lifts guidance as wealthy shoppers go bargain hunting
Amazon set for largest layoffs in company history
Ecommerce giant Amazon plans to cut around 10,000 jobs this week, according to the New York Times. This would be the largest round of layoffs in its 28 year history.
How did we get here?
Earlier this month Amazon warned of a slowdown in sales around what is usually a busy festive season. The news sent Amazon shares down and it became the first public company to ever lose $1tr in value, dipping to $879bn from its peak of $1.9tr in July 2021. (It’s now back to $1tr.)
Amazon’s cuts will focus on its lossmaking devices division – which makes Alexa - along with retail and HR departments.
The layoffs would be CEO Andy Jassy’s latest cost-cutting measure. Following a period of explosive growth, Amazon has scaled back on warehouse expansions and home delivery robots and frozen hiring.
The tech industry is under pressure
Amazon is the latest tech company to cut jobs as the industry braces itself for a potential economic downturn after an unprecedented explosion during the pandemic which has lost steam. Just last week Meta and Twitter axed a combined 14,000 employees to cut costs.
If a recession does materialise, the pullback in the amount of wealth built over the last ten years (from the booming tech market) will likely spill over to other parts of the economy.
Timing is everything: the job cut reports came on the same day that founder and chairman Jeff Bezos was applauded after he announced he would donate most of his wealth. The one-time world’s richest man will use his $124bn fortune to fight climate change and support social causes.
Stat of the day
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