Employees aren't the only ones feeling the pain from a jump in layoffs. Investors are too.
Shares of companies announcing the 20 largest layoffs in the past 12 months, including Amazon.com, Ford Motor and Peloton Interactive, are down an average of 12.8% since the time of their announcements, says an Investor's Business Daily analysis of data from Layoffstracker.com and S&P Global Market Intelligence. That's dramatically worse than the S&P 500's average 1.3% decline from the same time periods.
Staff reductions, in many ways, are a heads-up of more stock pain ahead. And there's likely more coming. Employers in the U.S. announced cutting 154,329 jobs in the fourth quarter, the highest since the final quarter of 2020, says Challenger, Gray & Christmas.
"The announced layoffs that started in 2022, are gathering steam," said Philip Blancato of Ladenburg Thalmann Asset Management, noting especially within the tech sector. "Not since the early days of Covid have positions been cut at such a rate."
Pain In Technology
Many of the layoffs are centered in the S&P 500 technology industry. And the shares are suffering from what appears to be management's acknowledgment of a pullback.
During December, 16,193 cuts occurred at tech companies for a total of 97,171 for the year, making it the leading job-cutting industry in 2022, says Challenger, Gray & Christmas. The number of tech cuts is up 649% from the 12,975 in 2021.
And half of the 20 largest announced layoffs in the past 12 months are from the tech or communications services sectors. And shares of the sectors are suffering, too. The Communication Services Select Sector SPDR ETF is down 32.7% in the past 12 months, much worse than the S&P 500's 16.3% decline in that time.
Looking At Some Of Investors' Pain
Amazon.com remains one of the biggest job cutters out there. And investors are feeling the sting, too.
The online retailing giant first on Nov. 15 announced plans to do away with 10,000 jobs. Shares of Amazon have slid 9.1% during that time, while the S&P 500 is down just 1.5%. It's also important to note that Amazon keeps upping the cuts. It announced updated plans on Jan. 4 of 2023 to cut 18,000 positions instead.
As far as layoffs that coincide with the largest stock losses, exercise equipment maker Peloton is suffering the most. Shares of the struggling company have sunk nearly 68% since it announced plans to wipe out 2,800 positions in February. During that time, the S&P 500 dropped 13%.
And it's important to note jobs aren't just being cut in technology. Shares of Ford Motor are down more than 19% after the automaker said in August it plans to cut 3,000 jobs.
Are Job Cuts The Needed Catharsis For The S&P 500?
There are some cases, though, where investors seem almost relieved some S&P 500 companies are cutting costs. The remarkable free fall in shares of Meta Platforms bottomed out in November around the time the company announced plans to eliminate 11,000 jobs. Shares are up 38% since then, while the S&P 500 is up 1.9%.
It's unclear if the job cutting will continue. But one thing is for sure: Investors by and large don't like it any more than employees do.
Biggest Public Company Job Cuts
New announcements made in past 12 months
| Company | Symbol | Layoffs | Date announced | Stock % ch. since | Sector |
|---|---|---|---|---|---|
| Meta Platforms | 11,000 | 11/9/2022 | 37.9% | Communication Services | |
| Amazon.com | 10,000 | 11/15/2022 | -8.8% | Consumer Discretionary | |
| Cisco Systems | 4,165 | 11/17/2022 | 10.0% | Information Technology | |
| Ford Motor | 3,000 | 8/22/2022 | -19.1% | Consumer Discretionary | |
| Seagate Technology | 3,000 | 10/26/2022 | -2.7% | Information Technology | |
| Peloton Interactive | 2,800 | 2/8/2022 | -67.1% | Consumer Discretionary | |
| Bilibili | 2,400 | 7/1/2022 | 7.4% | Communication Services | |
| Zillow Group | 2,000 | 11/2/2021 | -58.9% | Real Estate | |
| Fiserv | 1,700 | 10/20/2022 | 5.0% | Information Technology | |
| Morgan Stanley | 1,600 | 12/7/2022 | 0.1% | Financials | |
| Microsoft | 1,500 | 7/12/2022 | -13.5% | Information Technology | |
| Carvana | 1,500 | 11/18/2022 | -46.9% | Consumer Discretionary | |
| Snap | 1,280 | 8/30/2022 | -8.3% | Communication Services | |
| DoorDash | 1,250 | 11/30/2022 | -9.9% | Consumer Discretionary | |
| Coinbase Global | 1,100 | 6/14/2022 | -16.9% | Financials | |
| Lyft | 1,100 | 11/3/2022 | -4.9% | Industrials | |
| Gen Digital | 1,100 | 11/10/2022 | -5.8% | Information Technology | |
| Shopify | 1,000 | 7/26/2022 | -0.6% | Information Technology | |
| Robinhood Markets | 1,000 | 9/14/2022 | -16.2% | Financials | |
| Twilio | 1,000 | 9/14/2022 | -28.9% | Information Technology |
