In his first major economic speech of the year, President Joe Biden accentuated the positive — the stronger-than-expected GDP growth and low unemployment — but the FedEx announcement that the transportation giant will lay off 10 percent of its management staff reveals continuing stress fractures in the economy.
“First it was tech, then it was retail and now it’s shipping. When shipping companies are struggling, it’s certainly not a good sign for what’s happening with consumers,” tweeted Adam Kobeissi, founder and editor-in-chief of The Kobeissi Letter, which provides commentary on global capital markets.
Layoffs plagued the tech industry in 2022 and other high-profile job cuts impacted a wider variety of white-collar workers, wrote Andrew Murfett, editor at LinkedIn News. As longer-term effects of interest rate hikes affect the economy, there’s some concern that layoffs will spread to blue-collar industries, The Wall Street Journal reported.
FedEx said on Feb. 1 it would cut its staff of officers and directors by more than 10 percent as part of a wider cost-cutting effort that began in June 2022. The shipping giant said it planned to lay off 12,000 workers, a spokeswoman told Reuters.
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The layoffs account for slightly more than 2 percent of FedEx’s 547,000 full-time and part-time workers as of May 2022. Most of the job cuts were the result of attrition and other headcount management efforts, spokeswoman Rachael Simmons said.
“Unfortunately, this was a necessary action to become a more efficient, agile organization,” wrote FedEx CEO Raj Subramaniam.
Biden spent much of the second half of 2022 asking Americans to bear with him through historically high gas prices and inflation, CNBC reported. That was a tactical change from his earlier approach, which attracted accusations of recession denial and of trying to control the economic narrative.
The White House was reluctant to use the word “recession” in the lead-up to the 2022 midterm elections, pointing to underlying strength in jobs and the economy. Biden has since acknowledged the economic pain many Americans are feeling while pointing to strong economic reports that show his administration’s policies are taking hold.
Data has been positive. The U.S. is at its lowest unemployment rate in 50 years and, job growth has been at its strongest rate ever in the past two years, due in part to recovery after the covid pandemic and 2020 lockdowns. Consumer prices are higher than they were a year ago but Biden points to the slowdown in the rate at which they are rising.
The overall consumer price index dropped 0.1 percent in December compared to the previous month.
New research suggests that layoffs can have a ripple effect. Human resources analytics company Visier found that when employees were laid off or fired, the likelihood that their direct colleagues would quit was 7.7 percent higher than if those employees had stayed. Visier published a study about turnover contagion and later detailed its findings related to layoffs in a recent LinkedIn post.
“If you’re doing layoffs, you might as well add 7% to 8% to your count who are likely to leave as well,” said Andrea Derler, a principal researcher at Visier, in a Business Insider interview.