December 1, 2022
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The Week in Business: Mass Layoffs at Meta

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What began as a pause in hiring at Meta escalated into mass layoffs last week, with the company’s founder, Mark Zuckerberg, culling more than 11,000 employees, or roughly 13 percent of the work force. He said the company, the parent of Facebook, Instagram and WhatsApp, had grown too quickly during the pandemic, when a boom in online commerce lifted many tech companies. The layoffs were the latest in a string of cuts and hiring freezes across the industry. In the last few weeks alone, Twitter, Stripe and Lyft together have cut thousands of workers, and Amazon said it was pausing hiring for its corporate work force. The layoffs may tell a larger story about the outlook for the economy. But in some cases, unique factors contributed to the cuts: Twitter’s upheaval, for example, largely owes to Elon Musk’s takeover, while at Meta, billions have been invested in Mr. Zuckerberg’s vision for the metaverse, at a time when the company is already struggling financially.

After months of stubbornly high inflation, consumer prices have at last showed some signs of easing. The Consumer Price Index rose 7.7 percent in the year through October, slower than the 7.9 percent economists had been expecting before the new data was released on Thursday. The report is likely to be encouraging to Federal Reserve officials, who have been rapidly raising interest rates this year to tame inflation and cool the economy. Past inflation reports and other indicators had shown that many parts of the economy remained relatively resilient in the face of the Fed’s persistent efforts, leading to worries that the central bank’s aggressive path would lead to a recession. But stocks rose on Thursday, with investors taking the latest inflation numbers as an indication that the Fed might soften its approach. The S&P 500 soared 5.5 percent, its best one-day performance in more than two years.

A painful week for the crypto world ended with FTX, one of the largest cryptocurrency exchanges, filing for bankruptcy and changing its leadership. The saga started with a potential deal that promised to save FTX. The exchange had fallen on hard times after Changpeng Zhao, the chief executive of a larger rival called Binance, questioned the stability of the business, leading people to withdraw the equivalent of billions of dollars from the platform. That appeared to create a liquidity problem for FTX, formerly run by Sam Bankman-Fried. Mr. Zhao then said he would acquire FTX, a proposition that would have effectively bailed out the company, but he called it off just one day later, citing regulatory investigations and reports of mishandled funds.

Ahead of Black Friday, one of the country’s largest shopping days, a spate of retailers including Target, Macy’s and Walmart will release their quarterly earnings. Their most recent reports painted a grim picture: Target has seen its profits plunge this year, struggling in recent quarters with excess inventory as inflation-conscious customers stopped spending as much on electronics and apparel. Macy’s was similarly challenged by a glut of inventory the last time it reported results. Walmart has not been immune to the effects of high inflation either, reporting that customers were spending more on essential, lower-cost items but were pulling back on goods they deemed more discretionary. Investors and analysts will pay close attention to whether these retailers resolved their inventory problems and the extent to which discounts on that inventory may have eaten into profits.



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