The confusing job market: Tech and finance brace for the worst, retail is mixed, travel can't hire fast enough | Big Indy News
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The confusing job market: Tech and finance brace for the worst, retail is mixed, travel can’t hire fast enough



JetBlue Airways passengers in a crowded terminal on April 7, 2022 in the Fort Lauderdale-Hollywood International Airport in Fort Lauderdale, Florida.

Robert Nickelsberg | Getty Images News | Getty Images

It wasn’t long ago that Amazon, Shopify and Peloton doubled their workforces to manage through the pandemic surge, while Morgan Stanley staffed up to handle a record level of IPOs and mortgage lenders added headcount as rock-bottom rates led to a refinancing boom.

On the flipside, Delta Air Lines, Hilton Worldwide and legions of restaurants slashed headcount because of lockdowns that rolled through much of the country and other parts of the world.

Now, they’re scrambling to reverse course.

Companies that hired like crazy in 2020 and 2021 to meet customer demand are being forced to make sweeping cuts or impose hiring freezes with a possible recession on the horizon. In a matter of months, CEOs have gone from hyper-growth mode to concerns over “macroeconomic uncertainty,” a phrase investors have heard many times on second-quarter earnings calls. Stock trading app Robinhood and crypto exchange Coinbase both recently slashed more than 1,000 jobs after their splashy market debuts in 2021.

Meanwhile, airlines, hotels and eateries face the opposite problem as their businesses continue to pick up following the era of Covid-induced shutdowns. After instituting mass layoffs early in the pandemic, they can’t hire quickly enough to satisfy demand, and are dealing with a radically different labor market than the one they experienced over two years ago, before the cutbacks.

“The pandemic created very unique, once-in-a-lifetime conditions in many different industries that caused a dramatic reallocation of capital,” said Julia Pollak, chief economist at job recruiting site ZipRecruiter. “Many of those conditions no longer apply so you’re seeing a reallocation of capital back to more normal patterns.”

For employers, those patterns are particularly challenging to navigate, because inflation levels have jumped to a 40-year high, and the Fed has lifted its benchmark rate by 0.75 percentage point on consecutive occasions for the first time since the early 1990s.

The central bank’s efforts to tamp down inflation have raised concerns that the U.S. economy is headed for recession. Gross domestic product has fallen for two straight quarters, hitting a widely accepted rule of thumb for recession, though the National Bureau of Economic Research hasn’t yet made that declaration.

The downward trend was bound to happen eventually, and market experts lamented the frothiness in stock prices and absurdity of valuations as late as the fourth quarter of last year, when the major indexes hit record highs led by the riskiest assets.

That was never more evident than in November, when electric vehicle maker Rivian went public on almost no revenue and quickly reached a market cap of over $150 billion. Bitcoin hit a record the same day, touching close to $69,000.

Since then, bitcoin is off by two-thirds, and Rivian has lost about 80% of its value. In July, the car company started layoffs of about 6% of its workforce. Rivian’s headcount almost quintupled to around 14,000 between late 2020 and mid-2022.

Tech layoffs and an air of caution

Job cuts and hiring slowdowns were big talking points on tech earnings calls last week.

Amazon reduced its headcount by 99,000 people to 1.52 million employees at the end of the second quarter after almost doubling in size during the pandemic, when it needed to beef up its warehouse capabilities. Shopify, whose cloud technology helps retailers build and manage online stores, cut roughly 1,000 workers, or around 10% of its global workforce. The company doubled its headcount over a two-year period starting at the beginning of 2020, as the business boomed from the number or stores and restaurants that had to suddenly go digital.

Shopify CEO Tobias Lutke said in a memo to employees that the company had wagered that the pandemic surge would cause the transition from physical retail to ecommerce to “permanently leap ahead by 5 or even 10 years.”

“It’s now clear that bet didn’t pay off,” Lutke wrote, adding that the picture was starting to look more like it did before Covid. “Ultimately, placing this bet was my call to make and I got this wrong. Now, we have to adjust.” 

After Facebook parent Meta missed on its results and forecast a second straight quarter of declining revenue, CEO Mark Zuckerberg said the company will be reducing job growth over the next year. Headcount expanded by about 60% during the pandemic.

“This is a period that demands more intensity and I expect us to get more done with fewer resources,” Zuckerberg said.

Google parent Alphabet, which grew its workforce by over 30% during the two Covid years, recently told employees that they needed to focus and improve productivity. The company asked for suggestions on how to be more efficient at work.

“It’s clear we are facing a challenging macro environment with more uncertainty ahead,” CEO Sundar Pichai said in a meeting with employees. “We should think about how we can minimize distractions and really raise the bar on both product excellence and productivity.”

Few U.S. companies have been hit as hard as Peloton, which became an instant gym replacement during lockdowns and has since suffered from massive oversupply issues and out-of-control costs. After doubling headcount in the 12 months ended June 30, 2021, the company in February announced plans to cut 20% of corporate positions as it named a new CEO.

Banks and Wall Street bracing for a ‘hurricane’

Some of the Pelotons that were flying off the shelves in the pandemic were being offered as perks for overworked junior bankers, who were sorely needed to help manage a boom in IPOs, mergers and stock issuance. Activity picked up with such ferocity that junior bankers were complaining about 100-hour workweeks, and banks started scouring for talent in unusual places like consulting and accounting firms.

That helps explain why the six biggest U.S. banks added a combined 59,757 employees from the start of 2020 through the middle of 2022, the equivalent of the industry picking up the full population of a Morgan Stanley or a Goldman Sachs in a little over two years.

It wasn’t just investment banking. The government unleashed trillions of dollars in stimulus payments and small business loans designed to keep the economy moving amid the widespread shutdowns. A feared wave of loan defaults never arrived, and banks instead took in an unprecedented flood of deposits. Their Main Street lending operations had better repayment rates than before the pandemic.

Among top banks, Morgan Stanley saw the biggest jump in headcount, with its employee levels expanding 29% to 78,386 from early 2020 to the middle of this year. The growth was fueled in part by CEO James Gorman’s acquisitions of money management firms E-Trade and Eaton Vance.

At rival investment bank Goldman Sachs, staffing levels jumped 22% to 47,000 in the same timeframe, as CEO David Solomon broke into consumer finance and bolstered wealth management operations, including through the acquisition of fintech lender GreenSky.

Citigroup saw a 15% boost in headcount during the pandemic, while JPMorgan Chase added 8.5% to its workforce, becoming the industry’s largest employer.

But the good times on Wall Street didn’t last. The stock market had its worst first half in 50 years and IPOs dried up. Investment banking revenue at the major players declined sharply in the second quarter.

Goldman Sachs responded by slowing hiring and is considering a return to year-end job reductions, according to a person with knowledge of the bank’s plans. Employees typically make up the single biggest line item when it comes to expenses in banking, so when markets crater, layoffs are usually on the horizon. 

JPMorgan CEO Jamie Dimon warned investors in June that an economic “hurricane” was on its way, and said the bank was bracing itself for volatile markets.

Jamie Dimon, chief executive officer of JPMorgan Chase & Co., during a Bloomberg Television interview in London, U.K., on Wednesday, May 4, 2022.

Chris Ratcliffe | Bloomberg | Getty Images

ZipRecruiter’s Pollak said one area in finance where there will likely be a hemorrhaging of workers is in mortgage lending. She said 60% more people went into real estate in 2020 and 2021 because of record low mortgage rates and rising home prices. JPMorgan and Wells Fargo have reportedly trimmed hundreds of mortgage staffers as volumes collapsed.

“Nobody is refinancing anymore, and sales are slowing,” Pollak said. “You’re going to have to see employment levels and hiring slow down. That growth was all about that moment.”

The intersection of Silicon Valley and Wall Street is a particularly gloomy place at the moment as rising rates and crumbling stock multiples converge. Crypto trading platform Coinbase in June announced plans to lay off 18% of its workforce in preparation for a “crypto winter” and even rescinded job offers to people it had hired. Headcount tripled in 2021 to 3,730 employees.

Stock trading app Robinhood said Tuesday it’s cutting about 23% of its workforce, a little over three months after eliminating 9% of its full-time staff, which had ballooned from 2,100 to 3,800 in the last nine months of 2021.

“We are at the tail end of that pandemic-era distortion,” said Aaron Terrazas, chief economist at job search and review site Glassdoor. “Obviously, it’s not going away, but it is changing to a more normalized period, and companies are adapting to this new reality.”

Retail is whipsawing back and forth

In the retail industry, the story is more nuanced. At the onset of the pandemic, a stark divide quickly emerged between businesses deemed to be essential versus those that were not.

Retailers like Target and Walmart that sold groceries and other household goods were allowed to keep their lights on, while malls filled with apparel shops and department store chains were forced to shut down temporarily. Macy’s, Kohl’s and Gap had to furlough the majority of their retail employees as sales screeched to a halt.

But as these businesses reopened and millions of consumers received their stimulus checks, demand roared back to shopping malls and retailers’ websites. Companies hired people back or added to their workforce as quickly as they could.

Last August, Walmart began paying special bonuses to warehouse workers and covering 100% of college tuition and textbook costs for employees. Target rolled out a debt-free college education for full- or part-time employees, and boosted staff by 22% from early 2020 to the start of 2022. Macy’s promised better hourly wages.

They hardly could have predicted how quickly the dynamic would shift, as rapid and soaring inflation forced Americans to tighten their belts. Retailers have already started to warn of waning demand, leaving them with bloated inventories. Gap said higher promotions will hurt gross margins in its fiscal second quarter. Kohl’s cut its guidance for the second quarter, citing softened consumer spending. Walmart last week slashed its profit forecast and said surging prices for food and gas are squeezing consumers.

That pain is filtering into the ad market. Online bulletin board Pinterest on Monday cited “lower than expected demand from U.S. big box retailers and mid-market advertisers” as one reason why it missed Wall Street estimates for second-quarter earnings and revenue.

Retail giants have so far avoided big layoff announcements, but smaller players are in cut mode. Stitch Fix, 7-Eleven and Game Stop have said they’ll be eliminating jobs, and outdoor grill maker Weber warned it’s considering layoffs as sales slow.

The travel industry can’t hire fast enough

With all of the downsizing taking place across wide swaths of the U.S. economy, the applicant pool should be wide open for airlines, restaurants and hospitality companies, which are trying to repopulate their ranks after undergoing mass layoffs when Covid-19 hit.

It’s not so easy. Even though Amazon has reduced headcount of late, it’s still got far more people working in its warehouses than it did two years ago. Last year the company lifted average starting pay to $18 an hour, a level that’s difficult to meet for much of the services industry.

Hilton CEO Christopher Nassetta said on the quarterly earnings call in May that he wasn’t satisfied with customer service and that the company needs more workers. At the end of last year, even as travel was rebounding sharply, headcount at Hilton’s managed, owned and leased properties as well as corporate locations was down by over 30,000 from two years earlier.

It’s easy to see why customer service is a challenge. According to a report last week from McKinsey on summer 2022 travel trends, revenue per available room in the U.S. “is outstripping not just 2020 and 2021 levels, but increasingly 2019 levels too.”

Delta Airlines passenger jets are pictured outside the newly completed 1.3 million-square foot $4 billion Delta Airlines Terminal C at LaGuardia Airport in New York, June 1, 2022.

Mike Segar | Reuters

At airlines, headcount fell as low as 364,471 in November 2020, even though that wasn’t supposed to happen. U.S. carriers accepted $54 billion in taxpayer aid to keep staff on their payroll. But while layoffs were prohibited, voluntary buyouts were not, and airlines including Delta and Southwest shed thousands of workers. Delta last month said it has added 18,000 employees since the start of 2021, a similar number to what it let go during the pandemic in order to slash costs.

The industry is struggling to hire and train enough workers, particularly pilots, a process that takes several weeks to meet federal standards. Delta, American Airlines and Spirit Airlines recently trimmed schedules to allow for more wiggle room in handling operational challenges.

“The chief issue we’re working through is not hiring but a training and experience bubble,” Delta CEO Ed Bastian said on the quarterly earnings call last month. “Coupling this with the lingering effects of Covid and we’ve seen a reduction in crew availability and higher overtime. By ensuring capacity does not outstrip our resources and working through our training pipeline, we’ll continue to further improve our operational integrity.”

Travelers have been less than pleased. Over the Fourth of July holiday weekend, more than 12,000 flights were delayed due to bad weather and not enough staff. Pilots who took early retirement during the pandemic don’t appear terribly inclined to change their minds now that their services are once again in high demand.

“When we look at labor shortages related to travel, you can’t just flip a switch and suddenly have more baggage handlers that have passed security checks, or pilots,” said Joseph Fuller, professor of management practice at Harvard Business School. “We’re still seeing people not opt in to come back because they don’t like what their employers are dictating in terms of working conditions in a post-lethal pandemic world.”

— CNBC’s Ashley Capoot and Lily Yang contributed to this report.

WATCH: Big Tech reports earnings, most guide higher despite macro headwinds

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Sister Patricia Daly, 66, Dies; Took On Corporate Giants on Social Justice



For years, Sister Pat and other environmentalists had urged ExxonMobil to take significant steps to reduce greenhouse-gas emissions from its operations and products. In 2007, she proposed a resolution that called on that energy giant to set a firm date to report on its progress.

“We’re the most profitable company in the history of the planet,” she told Rex Tillerson, then the company’s chief executive (and later secretary of state in the Trump administration), at the company’s annual meeting, “but what will be our long-term health when we are really faced with the regulatory and other challenges around global warming?”

She added: “We are now, this company and every single one of us, challenged by one of the most profound moral concerns. And we have the wherewithal to respond to that.”

The proposal won 31 percent of the ballots, or about 1.4 billion shares, the largest tally for an ExxonMobil climate-change resolution. If not an outright victory, it was a page in a decades-long narrative that led ExxonMobil to put a climate scientist on its board in 2017. Three executives who recognized the urgency to address climate change joined the company’s board in 2021, nominated by a tiny activist hedge fund, Engine No. 1.

“The arc of her work led us to those victories by working from the inside and the outside,” John Passacantando, the founder of Ozone Action, an anti-global warming group, and a former executive director of Greenpeace, said in a phone interview.

In 1999, Vanity Fair named her to its Hall of Fame, applauding her as one who “translates belief into commitment and never backs down from a fight.”

Mary Beth Gallagher, who replaced Sister Pat as executive director of the Tri-State Coalition in 2017, said Sister Pat had not become frustrated when her resolutions were routinely voted down.

“She lived in hope,” Ms. Gallagher said. “We never talked about winning or losing. It was about raising consciousness and educating. If we’re not asking these questions, who will?”

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Families can make a tax-free rollover from 529 plans to Roth individual retirement accounts starting in 2024



Maskot | Maskot | Getty Images

Americans who save for college in 529 plans will soon have a way to rescue unused funds while keeping their tax benefits intact.

A $1.7 trillion government funding package has a provision that lets savers roll money from 529 plans to Roth individual retirement accounts free of income tax or tax penalties.

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The House passed the measure Friday and the Senate did so Thursday. The bill heads to President Biden, who’s expected to sign it into law.

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The rollover measure — which takes effect in 2024 — has some limitations. Among the largest: There’s a $35,000 lifetime cap on transfers.

“It’s a good provision for people who have [529 accounts] and the money hasn’t been used,” said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York.

That might happen if a beneficiary — such as a child or grandchild — doesn’t attend a college, university, vocational or private K-12 school, or other qualifying institution, for example. Or, a student may receive scholarships that mean some 529 funds are left over.

Millions of 529 accounts hold billions in savings

There were nearly 15 million 529 accounts at the end of last year, holding a total $480 billion, according to the Investment Company Institute. That’s an average of about $30,600 per account.

529 plans carry tax advantages for college savers. Namely, investment earnings on account contributions grow tax-free and aren’t taxable if used for qualifying education expenses like tuition, fees, books, and room and board.

Retirement plan changes in the omnibus spending bill

However, that investment growth is generally subject to income tax and a 10% tax penalty if used for an ineligible expense.

This is where rollovers to a Roth IRA can benefit savers with stranded 529 money. A transfer would skirt income tax and penalties; investments would keep growing tax-free in a Roth account, and future retirement withdrawals would also be tax-free.  

Some think it’s a handout for the rich

However, some critics think the rollover policy largely amounts to a tax handout to wealthier families.

“You’re giving savings incentives to those who can save and leaving behind those who cannot save,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

A 2012 analysis conducted by the Government Accountability Office found the typical American with a 529 account had “much more wealth” than someone without: $413,500 in total wealth for the median person, about 25 times the amount of a non-accountholder.

You’re giving savings incentives to those who can save and leaving behind those who cannot save.

Steve Rosenthal

senior fellow at the Urban-Brookings Tax Policy Center

Further, the typical owner had a roughly $142,000 annual income versus $45,000 for other families, the GAO report said. Almost half, 47%, had incomes over $150,000.

The new 529-to-Roth IRA transfer provision doesn’t carry income limits.

Limitations on 529-to-IRA transfers

While the new tax break primarily benefits wealthier families, there are “pretty significant” limitations on the rollovers that reduce the financial benefit, Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis, said in a tweet.

The restrictions include:

  • A $35,000 lifetime cap on transfers.
  • Rollovers are subject to the annual Roth IRA contribution limit. (The limit is $6,500 in 2023.)
  • The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
  • The 529 account must have been open for at least 15 years. (It seems changing account beneficiaries may restart that 15-year clock, Levine said.)
  • Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.

In a summary document, the Senate Finance Committee said current 529 tax rules have “led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education.”

“Families who sacrifice and save in 529 accounts should not be punished with tax and penalty years later if the beneficiary has found an alternative way to pay for their education,” it said.

Are 529 plans already flexible enough?

Some education savings experts think 529 accounts have adequate flexibility so as not to deter families from using them.

For example, owners with leftover account funds can change beneficiaries to another qualifying family member — thereby helping avoid a tax penalty for non-qualified withdrawals. Aside from a kid or grandkid, that family member might be you; a spouse; a son, daughter, brother, sister, father or mother-in-law; sibling or step-sibling; first cousin or their spouse; a niece, nephew or their spouse; or aunt and uncle, among others.

Owners can also keep funds in an account for a beneficiary’s graduate schooling or the education of a future grandchild, according to Funds can also be used to make up to $10,000 of student loan payments.

The tax penalty may also not be quite as bad as some think, according to education expert Mark Kantrowitz. For example, taxes are assessed at the beneficiary’s income-tax rate, which is generally lower than the parent’s tax rate by at least 10 percentage points.

In that case, the parent “is no worse off than they would have been had they saved in a taxable account,” depending on their tax rates on long-term capital gains, he said.

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Goldman grumbling grows for banking giant to sack CEO David Solomon



The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the usual suspects — his junior staffers annoyed that they have to work late or come into the office several times a week.

Solomon’s problems are more serious and existential, I am told, and how he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how much longer he stays in his job.

Solomon, 60, took the job in 2018 and was always somewhat of an odd choice to run the white-shoe investment bank that usually cultivated its leaders from within. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one of the causalities of the 2008 financial crisis).

He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.

In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a quirky side gig as a DJ in the summer Hamptons party circuit. He’s also not one for small talk, and doesn’t consult with a lot of people before handing down his edicts. 

“He doesn’t breed a lot of love,” said one former Goldman executive who knows Solomon well.

Lots of people at Goldman don’t like him, and they’re letting their views be heard both internally and with pals at rival firms.

Solomon as a DJ
Solomon is an outsider at a firm with a wickedly insular culture.
David Solomon/Instagram

For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing a great job. Goldman was running on all cylinders in deals and trading. Even as the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 compared to around a 44% rise in the S&P during that time.

Goldman is still the top M&A shop, even widening its market share over rivals in that important business line. Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.

Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all the shots at any firm, of course. But Goldman’s MDs and partners have historically been a powerful force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as more and more of them defect from his camp.

David Solomon as a DJ
Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.
David Solomon/Instagram

Here’s how they’re building a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.

Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. So far, it’s been a disaster, so much so that Solomon has been forced to scale back, possibly on the way to winding it down.

Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises could be in store as markets continue to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.

Goldman Sachs headquarters
The grumbling about Solomon is spreading to the managing director and partner class.
AFP via Getty Images

Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but part of their pool is being diverted to bankers to keep them in-house until the deal slowdown ends.

Since Solomon is a banker, he’s also being accused of favoritism, which in truth is a pretty lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and can spark management change, as it has done in the past.

There’s also a question about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the assumption that it would be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he could be looking for a deal and not one that keeps Goldman in charge.

Morgan Stanley CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
Morgan Stanley’s James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
AFP via Getty Images

At a time when most Goldman insiders believe he needs to do a “transformational deal,” i.e., something big that allows it to better compete against Morgan Stanley and super banks like JP Morgan, there is speculation that Solomon might allow Goldman to be swallowed whole by, say, a big asset manager or bank if the price was right.

As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Then again, there is something to be said for keeping your producers happy.

Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.

Former General Electric CEO Jack Welch
Jack Welch was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.
Getty Images

“Jack could chew your ass, then put his arm around you and make you feel great,” one of his longtime executives, Bob Nardelli, once told me.

It’s why so many other talented execs chose to stay around under Welch, abuse and all, and left when his successor took over, watching GE implode from the outside.

Maybe it’s a good time for Solomon to take a page from Welch and start hugging it out.

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