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Amazon Sends Chilly Signs About the Economy

The e-commerce giant has just made a decision that suggests the health of the economy is not improving.
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Tech giants don't bring good news for investors. 

While the markets are looking for reassuring news on the health of the economy, Silicon Valley is only delivering very bad news. 

In recent weeks, red signals have been sent by Alphabet  (GOOGL) - Get Free Report, Microsoft  (MSFT) - Get Free Report and Meta Platforms  (META) - Get Free Report

Last month, Alphabet CEO Sundar Pichai warned against what he called "the toughest macroeconomic conditions" in the past 10 years.

"Look, I hope all of you are reading the news, externally," Pichai told employees during an all-hands meeting held this week in New York. "The fact that you know, we are being a bit more responsible through one of the toughest macroeconomic conditions underway in the past decade, I think it’s important that as a company, we pull together to get through moments like this.”

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Alphabet and Meta Reduce Their Costs

Pichai was trying to justify why the company was taking drastic cost-cutting measures while profits remained strong. Google just canceled the next version of its Pixelbook laptop and dissolved the team responsible for building it.

The company has also made cuts at its Area 120 tech incubator whose goal was to keep some of the company’s talent in-house, according to Basically, Google is reducing funding and cutting about half of the unit’s current projects and teams.

Alphabet has also cut several perks, travel and entertainment budgets.

Also in September, Facebook's CEO Mark Zuckerberg told employees that the company was entering a new era marked by lackluster growth. 

Meta Platforms, parent company of Facebook, Instagram and WhatsApp, would downsize for the first time since 2004. 

This involves several actions: The firm will freeze hiring, restructure some teams and reduce budgets even for teams in growth sectors. Meta should, for example, not replace departures, and will part ways with people "who aren't succeeding," Zuckerberg told employees.

"I had hoped the economy would have more clearly stabilized by now," the chief executive officer said. "But from what we're seeing, it doesn't yet seem like it has, so we want to plan somewhat conservatively."

The boss added that Meta will be "somewhat smaller" by the end of 2023.

Meta and Alphabet moves show economy softening as economists worry Federal Reserve's aggressive interest rate hike to quell inflation could trigger a recession.

Amazon Freezes Hiring

Amazon  (AMZN) - Get Free Report seems to be following in the footsteps of Alphabet and Meta. The e-commerce giant will freeze corporate hiring in its retail division which includes online and physical stores, its marketplace for third-party sellers and Amazon Prime, its subscription service.

The group founded by Jeff Bezos has asked recruiters to withdraw all current job offers in this division in the coming days, reports the New York Times, citing an internal memo. The company also asked them to put an end to the recruitment activities planned for the next few months. 

There were more than 10,000 job openings posted in the stores division at the time the freeze was announced, according to the New York Times. 

Amazon does not want to talk about hiring freeze, however. The company says new openings will be available in 2023. The hiring freeze is expected to last at least until the end of 2022. 

The freeze won't impact Amazon Web Services, the company's cloud computing division or the warehouse workers.

Amazon did not respond to request for comment from TheStreet. 

But Brad Glasser, a spokesperson, gave a statement to several media.

"Amazon continues to have a significant number of open roles available across the company," Glasser said. "We have many different businesses at various stages of evolution, and we expect to keep adjusting our hiring strategies in each of these businesses at various junctures."

Amazon's retail division, which underwent a leadership change last summer, had experienced strong growth during the covid-19 pandemic, benefiting from the fact that consumers avoided physical stores. 

To cope with the increase in demand, Amazon had also hired a lot of personnel, which had resulted in a workforce almost doubled in two years.

But since the reopening, the growth of the retail business has slowed. Faced with this new reality, CEO Andy Jassy told investors that the firm will focus on cutting costs and being efficient.

In recent months, the group has closed or canceled the launch of new sites. The Seattle company has also closed almost all of its U.S call centers, according to Bloomberg.

"I would note that we're still up 188,000 year over year and nearly double the headcount of what we had heading into the pandemic in early 2020," Chief Financial Officer Brian Olsavsky told analysts during the second quarter earnings' call. "There will be adjustments to that as we move forward into more holiday-level demand.