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- [00:06]
Ryan Knudsen
Lately, it seems like the word layoffs has been all over the news.
- [00:11]
Narrator/Announcer
Got breaking news this morning. Massive job cuts at Amazon. Overnight, the company announcing It'll eliminate approximately 14,000 rolls.
- [00:20]
Chip Kutter
Verizon is cutting at least 15,000 jobs. Target is preparing to cut 1800 corporate jobs. Name the company and name a big brand that you maybe interact with. And chances are they probably have let some people go.
- [00:35]
Ryan Knudsen
That's our colleague Chip Kutter.
- [00:37]
Chip Kutter
It's Amazon, it's Verizon, it's Target.
- [00:41]
Narrator/Announcer
We have seen layoffs recently from Microsoft.
- [00:44]
Chip Kutter
Meta, Google, Salesforce, Intel. Just these big, big companies. And you have so many other major employers across the US Just thinking differently about how they're going to hire, how they're going to get work done, how many people they need.
- [00:58]
Ryan Knudsen
The layoffs primarily target white collar workers.
- [01:02]
Chip Kutter
The job cuts at Paramount will be in areas like finance, legal, technology, and marketing and the company. These were corporate jobs. These were white collar jobs. They were jobs in areas like hr, in marketing. They were people who made good money, made a good salary.
- [01:20]
Ryan Knudsen
And there's a theme running through a lot of these layoffs. Advancements in artificial intelligence.
- [01:28]
Chip Kutter
Companies are just really starting to kind of understand how artificial intelligence could be used inside of organizations right now. The fear is that there is this smoke and their question is, how big could this fire go? How big could it spread? Is this going to be a jobs apocalypse or are there going to be new roles created and are people going to be okay? And there's a big debate on both sides of that.
- [01:48]
Ryan Knudsen
Is the beginning of the AI Armageddon movie, actually just everybody losing their jobs?
- [01:53]
Chip Kutter
That's right. That is the big question.
- [01:58]
Ryan Knudsen
Welcome to the Journey, our show about money, business and power. I'm Ryan knudsen. It's Thursday, November 20th. Coming up on the show, has the era of AI layoffs officially begun?
- [02:26]
Narrator/Announcer
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- [02:56]
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- [03:30]
Ryan Knudsen
From the perspective of corporate America, can you just walk me through the last five years in the labor market?
- [03:38]
Chip Kutter
It's been a weird five years. So we go back five years. We have Covid, of course, the pandemic. This is the era of the zoom layoff where companies start letting people go as their business contracts because of COVID Then cut to 2021, things start to look better, people reemerge, companies start hiring again. We get the period known as the great resignation where lots of people end up leaving their jobs because there's just so much opportunity. Companies are hiring again, there's a lot.
- [04:08]
Ryan Knudsen
Of movement and there was like a.
- [04:09]
Chip Kutter
Worker shortage, a worker shortage. Companies were offering signing bonuses. They were just really trying to, they would do this thing called labor hoarding where they would just hire people even if they didn't have roles for them. A lot of the big tech companies did this. And so it was this era that like, we don't even know what we're going to need you to do, but we just want to hire smart people and we'll figure it out. Now it's almost the opposite that we are now in this moment where companies talk about their ability to constrain headcount as a real win. And it's this idea that big companies, big headcounts are almost an impediment to growth. CEOs see what some startups are able to do with only a handful of employees. Some of these startups that have billion dollar valuations and very small stabs and the leaders of big corporations across America really look at that with envy and think, why can't my company do that with a lot smaller workforce?
- [05:05]
Ryan Knudsen
And companies are now touting their ability to stay lean.
- [05:08]
Chip Kutter
They're trying to signal to investors in Wall street that they're being careful about spending. They're watching their costs. Wells Fargo CEO earlier this year boasted to investors that they had been able to sort of cut the company's headcount for 20 consecutive quarters. Bank of America CEO told investors he reminded them sort of how big the company was when he started and how headcount had shrunk. It's almost, you know, this, this idea that we want to brag about sort of all that we're doing to keep headcount low.
- [05:37]
Ryan Knudsen
The overall economic picture is murky. Data released today from the Bureau of Labor Statistics show The economy added 119,000 jobs in September, but the unemployment rate ticked up slightly to 4.4%. One thing that always seems to accompany these big layoffs is lofty talk about how the workplace is being transformed by AI.
- [05:59]
Narrator/Announcer
Microsoft eliminated over 15,000 this year while investing about 80 billion in AI.
- [06:03]
T-Mobile Sponsor Voice
Amazon executives say they're all in on.
- [06:06]
Chip Kutter
AI, confident they can continue to grow with fewer people.
- [06:09]
Narrator/Announcer
A Google executive wrote, if you don't feel aligned, this is your exit path.
- [06:16]
Chip Kutter
I was really struck by what the now outgoing CEO of Walmart said about this Last month. I was in an auditorium at the company's brand new headquarters in Bentonville, Arkansas, and Doug McMillan, Walmart's CEO, got on stage and said he thought AI was going to change literally every job. And this really kind of struck me because here is the country's largest private employer and saying that AI is going to reshape work fundamentally. And the company also said that it did not plan on increasing its headcount over the next three years. It wanted to keep headcount flat.
- [06:52]
Ryan Knudsen
And this is, this is America's largest employer, right? Walmart saying that they're going to keep their headcount flat over three years.
- [06:58]
Chip Kutter
Pretty big deal. Like that is significant. Roles are going to change. Some roles will go away, others will be added. Headcount will stay flat. Walmart doesn't intend for its business to stay flat. It certainly wants to grow its sales, it wants to increase its profits. But it thinks it can do that while keeping its headcount the same at what it is right now. And I think that's really notable.
- [07:21]
Ryan Knudsen
So how is AI actually being used in the workplace? And how is this wave of layoffs affecting the economy? That's next.
- [07:36]
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- [08:42]
Ryan Knudsen
Lately CEOs are talking a lot about how AI is going to change the workforce. For instance, the CEO of the clothing resale company Thredup recently said, quote, I think it's going to destroy way more jobs than the average person thinks.
- [08:56]
Chip Kutter
CEOs started putting out these internal memos too of just making it clear that AI is going to destroy jobs. And they're not all in agreement on this, but a fair number of leaders are really acknowledging this could be pretty destructive. There are a fair amount of good paying, solid white collar jobs that could go away because of this technology.
- [09:18]
Ryan Knudsen
So what are companies saying about how exactly AI is being used to replace workers?
- [09:24]
Chip Kutter
The idea that we can use AI, we can use these software agents, these technological systems that can help do work without humans, that do work faster and to kind of really sort of usher in a new era of productivity. So companies are now rolling out AI into more departments and they're starting to see the results. So whether that is in areas like marketing or legal or human resources or in their call centers.
- [09:51]
Ryan Knudsen
I mean, I hate to sound like a little bit naive here, but I feel like a lot of, a lot of times that I've seen examples of AI being used or tried to use it myself, that I'm actually like, it's, oh, like it has this sort of veneer of intelligence but actually when you try to actually go and use the thing, it's actually kind of dumb still.
- [10:12]
Chip Kutter
It's kind of dumb. It's sort of, it's just, it's sort of giving you what it thinks should be a good, you know, result. What it, what it seems like on, you know, from the surface to be good. I think the tech optimist would say, like these tools are improving so fast. Give it time, it's going to get better and better. You know, even if, even if it takes sort of a human to be that final set of eyes that make something better, to revise it, you're still working faster than you were before. You're still, you're still able to do more than you could.
- [10:40]
Ryan Knudsen
So let's go, let's go back to Walmart now for a minute. What is Walmart saying That it's using.
- [10:45]
Chip Kutter
AI for Walmart is interesting because Doug McMillan said maybe there's a job in the world that AI won't change, but I haven't thought of it. The company is already starting to change how it uses AI internally. It in recent years has automated many of its warehouses with the help of AI. That has triggered some job cuts. It is looking to automate some back of store tasks. It's also established some new jobs. So it created an agent builder position this year and that's an employee who builds AI tools to help merchants. And so it's saying that it expects to add people in some areas. So it'll add people in sort of high touch customer positions like its bakeries and its stores or home delivery. But it also then wants to use AI and technology to eliminate some roles to make it more efficient. It actually just also hired an executive to help oversee all of this. So it hired an executive from Instacart who reports directly to the CEO. And part of his role includes determining how Walmart's workforce should shift.
- [11:49]
Ryan Knudsen
Does Walmart anticipate having robot greeters instead of the classic friendly seniors that are usually in the front of the stores?
- [11:58]
Chip Kutter
So Walmart was asked about this, like, should you expect these humanoid robots in the stores? And leaders pushed back pretty hard on this and they said, no, we expect to serve people with people. People will probably be creeped out if there's suddenly sort of a robot greeter at the front of the store.
- [12:14]
Ryan Knudsen
Another job AI is still not doing is actually laying people off. Humans are still fumbling their way through it with all their awkwardness.
- [12:23]
Chip Kutter
There's sort of this desire to lay people off in the most efficient way possible. And that is leading to some new tactics. So when Amazon began cutting its 14,000 employees recently, it actually sent many of them a text, some of whom received this in the middle of the night, that said, check your inboxes. And then there, when people looked at their inboxes, they, they got a note saying, essentially an update on your role at Amazon and making it clear your role is being eliminated.
- [12:51]
Ryan Knudsen
Ouch. That sounds like a pretty terrible push notification.
- [12:57]
Chip Kutter
Pretty awful. Something you don't want to see in your phone. What companies want to avoid is sort of the communal emoting, this idea of people coming out of conference rooms after they're being told they're losing their jobs and then hugging their colleagues. Everybody's crying, they're embracing each other. There's a whole scene. Companies don't want that anymore.
- [13:17]
Ryan Knudsen
Companies want to avoid scenes like what happened earlier this month at Conde Nast after a number of employees were Laid off, a group of workers approached the company's head of HR at his office door demanding to talk.
- [13:30]
Chip Kutter
You don't want to answer any questions.
- [13:32]
Ryan Knudsen
I've directed you back to your workplace.
- [13:36]
Chip Kutter
Is that, is that a good answer, guys?
- [13:38]
Ryan Knudsen
Absolutely not. Come on, Stan. That's not a really good answer, Stan.
- [13:42]
Chip Kutter
This is leading to companies increasingly doing layoffs at home. Target shut down its corporate office in the US for the week that it did layoffs in October. Southwest largely did the same when it did its layoffs earlier this year. The idea is like, everybody's gonna get the message at once. It's not gonna be a one on one conversation with your manager necessarily. You're just gonna all find out.
- [14:04]
Ryan Knudsen
What's your sense of where we are in the layoff wave? Is it almost over or just beginning?
- [14:11]
Chip Kutter
We're just at the beginning of this. I mean, if AI is just being rolled out inside lots of companies, we don't quite know then just how deep companies could cut or where they could decide that they can shrink even more. That's what's adding to this sense of paranoia inside so many organizations where you just have colleagues going up to their peers being like, do you think we're next? Do you think we're safe? That's the conversation among workers right now. How safe should I feel in my job right now? I'm in this white collar job that seemed pretty secure a few years ago. Is it now? It's really hard to say.
- [14:43]
Ryan Knudsen
We've talked a lot about how companies are saying that they're trying to be more efficient or that they're ahead of the curve by adopting AI. But could another factor be that companies are actually worried about the economy getting weaker and so they're cutting costs to prepare for a downturn?
- [14:58]
Chip Kutter
I think that is a big part of this. Even if CEOs don't always admit it, they're talking about this. They're preparing for things to get a little bit worse. I was talking with one CEO who really follows the job market and he described this as a mood based downsizing where CEOs are talking to other CEOs and realizing, well, one company is cutting, preparing for perhaps a worsening economy, or they just want to cut costs, so then other CEOs are going to do the same. It's this idea that you tell me why we can't cut. CEOs going to their teams being like, come on, there's plenty of people here who maybe don't need to be here. Find some ways to let people go.
- [15:35]
Ryan Knudsen
What is it that's making CEOs nervous about the economy.
- [15:39]
Chip Kutter
I think CEOs see consumers starting to pull back a little bit. Inflation is still a reality. Consumers feel stretched. We now have unemployment ticking up. That's making things harder. I think there's a real concern that as we sort of go into year two of the Trump administration, that perhaps there still are going to be disruptions that could affect the economy.
- [16:02]
Ryan Knudsen
How does this layoff surge fit into the bigger economic picture? I mean, obviously it can't be good.
- [16:08]
Chip Kutter
This could have real problems for the economy. Think about sort of consumer spending, how important that is to the economy. Think about sort of the role that work plays, you know, in our identities, in our lives and sort of just people's ability to just live their lives and pay their rent and travel and do all the things that consumers do. It's really going to be an issue if there are sort of bigger white collar job cuts.
- [16:33]
Ryan Knudsen
Despite all the AI talk, Chip says there's still a long way to go before AI fully takes over the office, if it ever does.
- [16:41]
Chip Kutter
There's not a consensus of sort of what AI ultimately does. We've seen past tech revolutions where plenty of new jobs have been created. They're not always easy to predict now, but they end up being created later on. And so some would say we might still be okay in all this, but it's unclear. And I think right now it just seems really worrying because we are in this mode where companies realize there's a lot more to cut, that these companies can get smaller, many executives would argue, and they'll still be okay. And that can still have a vast human toll.
- [17:26]
Ryan Knudsen
That's all for today. Thursday, November 20th. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Sarah Nassauer, Ray Smith and Haley Zimmerman. Thanks for listening. See you tomorrow.