Since mid-May, real-time indicators warned the labor market had hit a brick wall. Piper Sandler predicted last week that up to a million layoffs or more were ahead as the US economy is on the verge of recession.
The latest sign of an impending job market shock is an email seen by Reuters from the world's richest man, Tesla CEO Elon Musk, who told executives the electric carmaker needs to cut staff by 10% because he has a "super bad feeling" about where the economy was headed.
The email, titled "pause all hiring worldwide," was sent to executives on Thursday and is the latest sign of mounting macroeconomic headwinds as lower-than-expected US new car sales in May could be a harbinger of a recession.
In an another email Tuesday, Musk told employees:
"Everyone at Tesla is required to spend a minimum of 40 hours in the office per week … If you don't show up, we will assume you have resigned."
On Wednesday, Musk tweeted: "Recessions serve a vital economic cleansing function."
Tesla, which has EV factories worldwide, including ones in the US, Berlin, and China, employs about 100k staff, so reducing 10% of jobs could equate to 10k people.
Musk's stark warning of impending economic doom and the need for job cuts sent Tesla shares down nearly 4% in premarket, dragging down Nasdaq 100 futures about half a percentage point and other electric carmakers.
"I think it's very prudent by Tesla to reduce the staff … This market is not rewarding high revenue growth at all costs. You're being rewarded from improvement in return on investor capital and free cash flow generation," Peter Garnry, head of the equity strategy at Saxo Bank A/S, told Bloomberg Television.
Garnry is right. Piper Sandler recently compiled a list and showed the recent company mass layoff announcements are mostly with tech unicorns.
Meanwhile, the Federal Reserve shows no signs of letting up on its most aggressive monetary tightening program in decades with nearly three 50bps hikes through the summer, an attempt to tame inflation at 40-year highs. Besides rate hikes, the Fed has begun to unwind its monstrous balance, adding to even more liquidity draining from markets. And this is all happening as the Citi US Eco surprise index is already crashing …
Days ago, JPMorgan Chase CEO Jamie Dimon warned: A "hurricane is right out there down the road coming our way."
Biden about to find out what polls worse: recession and bear market or runaway inflation.
— zerohedge (@zerohedge) May 20, 2022
Musk's warning of Tesla job cuts is a sign of the coming mass layoff tsunami and economic downturn.