As a paradigm-shifting e-commerce and technology giant, Amazon (NASDAQ:AMZN) frequently generates headlines. However, the latest news involving a headcount reduction of 9,000 employees wasn’t the development management had hoped for prior to the equities sector melting down throughout 2022. With fears of a recession rising, many investors dumped AMZN stock amid the Amazon layoffs.
Amazon CEO Andy Jassy announced the workforce trimming in a memo to staff on Monday, per the Associated Press. Notably, the 9,000 impacted employees adds on to the 18,000 workers the company stated it would lay off in January. In the memo, Jassy remarked that the second phase of the company’s annual planning process — which involved identifying which business units to trim — ended this month.
According to the Wall Street Journal, Jassy defended the move as necessary amid the environment AMZN stock found itself in. “Given the uncertain economy in which we reside, and the uncertainty that exists in the near future, we have chosen to be more streamlined in our costs and head count,” Jassy said.
However, it’s important to note that the Amazon layoffs doesn’t involve axing every component of its business. Per Jassy, the tech giant will still hire in some strategic areas.
Amazon Layoffs Possibly Confirms Recessionary Pressures
In many cases, job cuts generate upward mobility in the publicly traded shares of underlying enterprises. However, the Amazon layoffs provided no such fortune, with its market value conspicuously tumbling. Likely, the negativity surrounds increasing fears of a recession.
For one thing, as the AP pointed out, the latest round of job cuts “will hit profitable areas for the company including its cloud computing unit AWS and its burgeoning advertising business. Twitch, the gaming platform Amazon owns, will also see some layoffs as well as Amazon’s PXT organizations, which handle human resources and other functions.”
Moreover, the Amazon layoffs appear aligned with a slowdown in demand. Per the WSJ, Brian Olsavsky, Amazon’s chief financial officer, stated that the e-commerce firm saw a slowdown in AWS spending. The culprit centered on customers seeking to rein in costs.
In addition, Amazon’s advertising business — which has become a more integral sales driver — incurred a slowdown in the fourth quarter. Put another way, the Amazon layoffs stem from fundamental headwinds that justify the decision to cut headcount.
Even worse, many other tech firms have announced significant cuts. According to Layoffs.fyi, a site tracking job cuts in the tech industry, sector enterprises have laid off about 300,000 workers since 2022. Unfortunately, then, the problems leading to the Amazon layoffs may be systemic. If so, management may not be able to do anything but attempt to ride out the storm.
Why It Matters
Amid the banking sector fallout, all eyes will focus on the Federal Reserve. Theoretically, the central bank may temporarily reverse course to protect banking stability and confidence. However, economic experts still expect the Fed to go through with rate hikes. If so, this dynamic could add more pressure to AMZN stock and its ilk.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.