Microsoft lays off 9,000 employees

 Microsoft is firing thousands of workers, its second mass layoff in months.

The tech giant began sending out layoff notices Wednesday.

The company declined to say how many people would be laid off but said that it will comprise less than 4% of the workforce it had a year ago.

Microsoft said the cuts will affect multiple teams around the world, including its sales division and its Xbox video game business.

“We continue to implement organizational changes necessary to best position the company and teams for success in a dynamic marketplace,” it said in a statement.

Microsoft employed 228,000 full-time workers as of last June, the last time it reported its annual headcount. The company said Wednesday that its latest layoffs would cut close to 4% of that workforce, which would be about 9,000 people. But it has already had at least three layoffs this year.

Until now, the biggest was in May, when Microsoft began laying off about 6,000 workers, nearly 3% of its global workforce and its largest job cuts in more than two years as the company spent heavily on artificial intelligence.

Microsoft also cut another 300 workers based out of its Redmond, Washington headquarters in June, on top of nearly 2,000 who lost their jobs in the Puget Sound region in May, according to notices it sent to Washington state employment officials.

The layoffs announced in May were heavily focused on people in software engineering and product management roles, according to lists the company sent to employment agencies in Washington and California, where the cuts also hit Microsoft offices in the San Francisco Bay Area.

Microsoft’s chief financial officer Amy Hood said on an April earnings call that the company was focused on “building high-performing teams and increasing our agility by reducing layers with fewer managers.”

The company has repeatedly characterized its recent layoffs as part of a push to trim management layers, but the May focus on software engineering jobs has fueled worries about how the company’s own AI code-writing products could reduce the number of people needed for programming jobs.

Microsoft CEO Satya Nadella said earlier this year that “maybe 20, 30% of the code” for some of Microsoft’s coding projects is probably all written by software.”

 U.S. private payrolls fell for the first time in more than two years in June as economic uncertainty hampered hiring, but low layoffs continued to anchor the labor market.

Private payrolls dropped by 33,000 jobs last month, the first decline since March 2023, after a downwardly revised increase of 29,000 in May, the ADP National Employment Report showed on Wednesday. Economists polled by Reuters had forecast the report would show private employment increasing by 95,000 following a previously reported gain of 37,000 in May.

There were job losses in the professional and business services, education and health services, and financial activities sectors. But the leisure and hospitality, manufacturing, and construction industries added jobs.

The ADP report, jointly developed with the Stanford Digital Economy Lab, was published ahead of the more comprehensive employment report for June due to be released on Thursday by the Labor Department's Bureau of Labor Statistics. There is no correlation between the ADP and BLS employment reports.

The BLS' employment report is being published a day early because of the Independence Day holiday on Friday. Economists shrugged off the decline in the ADP measure, noting its poor track record predicting the official payrolls count.

"Use ADP only to gauge the big picture," said Carl Weinberg, chief economist at High Frequency Economics.

"Right now, that picture shows ADP's private sector employment estimates declining steadily since December. Today's big drop underscores that decaying trend."

U.S. stocks were mixed in early trading. The dollar rose versus a basket of currencies. Longer-dated U.S. Treasury yields rose.

ADP

TRADE POLICY UNCERTAINTY

Job growth has ebbed as businesses grapple with trade policy uncertainty, but companies have not yet resorted to widespread layoffs, keeping the labor market afloat.

A separate report from global outplacement firm Challenger, Gray & Christmas showed job cuts announced by U.S.-based employers totaled 47,999 in June, a drop of 49% from the prior month.

Planned layoffs totaled 247,256 in the second quarter, down 50% from the first quarter. The number of planned hires, however, dropped to 3,191 last month from 9,683 in May.

Sluggish hiring was also evident in the release on Tuesday of the government's Job Openings and Labor Turnover Survey, or JOLTS report. It showed hires at 5.503 million in May, a decline of 112,000, and 1.07 job openings for every unemployed person in May, up from 1.03 in April.

"Without a strong economic driver, hiring may remain measured through the rest of the year," said Andrew Challenger, senior vice president at Challenger, Gray & Christmas.

Challenger Gray

Economists polled by Reuters expect the government's employment report to show private payrolls increased by 105,000 in June after rising by 140,000 in May.

Overall nonfarm payrolls are estimated to have advanced by 110,000 jobs after a gain of 139,000 in May. The unemployment rate is forecast to climb to 4.3% from 4.2% in May.

Economists said it was unclear whether Republican President Donald Trump's massive tax-cut and spending bill, which was narrowly passed by the U.S. Senate on Tuesday, would stimulate hiring. The bill, which nonpartisan analysts say will add $3.4 trillion to the nation's debt over the next decade, faces a vote in the House of Representatives. Republicans control both houses of Congress.

Economists expect the Federal Reserve to resume cutting interest rates in September. The U.S. central bank last month left its benchmark overnight interest rate in the 4.25%-4.50% range, where it has been since December.

Fed Chair Jerome Powell on Tuesday reiterated the central bank's plans to "wait and learn more" about the impact of tariffs on inflation before lowering interest rates again.

"We are sticking with our forecast for a 100,000 increase in private payrolls in June, still a material step down from the average 197,000 initially reported rise over the previous six months, but probably strong enough to rule out a July rate cut," said Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. "We see the Fed waiting until September."

Tesla Inc. shares jumped after the carmaker posted a less drastic decline in vehicle sales than the most pessimistic analysts feared.

The company delivered 384,122 vehicles during the last three months, down 13% from a year earlier. While that leaves Tesla in a deep hole to dig out from to avoid another annual drop, some investors were braced for a more than 20% plunge.

“We’re at the bottom here,” Gene Munster, managing partner of Deepwater Asset Management, said on Bloomberg Television.

Tesla shares rose 5% as of 11:20 a.m. Wednesday in New York and are still down about 22% for the year.

Tesla Sales Dropped 13% in Second Quarter

Carmaker may be headed for another annual drop

Source: Company statements

The sales figures run counter to Elon Musk’s claim in mid-May that Tesla’s car business had recovered from an early-year slump driven in part by blowback over his work in the Trump administration. Sales could be further challenged toward the end of this year if Congress passes the president’s multitrillion-dollar spending bill that would eliminate tax credits for EV purchases.

“We expect this will exacerbate questions regarding brand damage and see risk to both our/consensus full-year estimates,” Ben Kallo, a Baird analyst with the equivalent of a hold rating on Tesla’s stock, said in a note.

Tesla was counting on a boost in the quarter from the redesigned Model Y sport utility vehicle, by far its most important product. But the company’s otherwise-stale lineup is losing luster relative to BYD Co. and Xiaomi Corp.’s offerings in China, while General Motors Co. is gaining in the US electric-car market.

Tesla told investors back in April that new vehicles, including more affordable models, remained on track to go into production during the first half of the year. Cheaper new cars didn’t materialize, leading analysts to speculate they may be delayed.

“No mention of the more affordable vehicle has been given, and we believe this may be required to return to volume growth,” Kallo wrote to clients.

Most analysts now expect Tesla to report its second consecutive annual decline in vehicle sales. Analysts surveyed by Bloomberg are on average projecting the company will deliver around 1.66 million vehicles in 2025, down from 1.79 million last year.

Tesla’s Annual Deliveries May Drop Again

Analysts are bracing for a second consecutive decline

Source: Company statements, Bloomberg data

Tesla management already have backed away from their prediction in January that the vehicle business would return to growth this year, with executives cautioning in April that they would revisit their outlook when reporting earnings this month.

Musk then told Bloomberg News on May 20 that Tesla’s deliveries had recovered, and that the company didn’t anticipate any meaningful shortfall going forward.

“The sales numbers at this point are strong and we see no problem with demand,” the CEO said in an interview at the Qatar Economic Forum.

Tesla produced over 25,000 more vehicles than it delivered to customers for the second quarter in a row, suggesting the company may be overestimating demand.

Tesla Built Inventory in First Half of the Year

EV production exceeded deliveries in both quarters

Source: Company statements

Musk diverted investor attention away from vehicle sales toward the end of the quarter by launching a long-promised driverless taxi service. While Tesla only offered rides to a small contingent of fans in a confined area of Austin — and footage of several drives drew scrutiny from federal safety regulators — Tesla’s shares rose 23% during the three months.

The CEO is now taking on more oversight of the company’s car business following the departure of close confidant Omead Afshar, who was responsible for Tesla’s sales and manufacturing operations in North America and Europe.

Tesla’s sales operations in the US and Europe will now report to Musk, while Tom Zhu, a senior vice president, will continue to oversee sales in Asia and take over manufacturing operations globally, Bloomberg reported Tuesday, citing people familiar with the matter.

President Trump's tariffs add about $82 billion in total new costs for all mid-sized U.S. companies, per a new estimate — a sum that would more than double if rates return to levels seen at the height of trade tensions in April.

That finding, from the JPMorganChase Institute, is among the first to tally the hit to select businesses that are more likely to rely on international trade.

• It gives some insight into the magnitude of costs that could ripple out to the rest of the economy, either in the form of price hikes or slimmer margins that could force owners to shrink costs elsewhere, perhaps via layoffs.

"The cost amounts to 3% of their payroll — it's meaningful that they are paying that much to compensate for the tariffs," JPMorganChase Institute president Chris Wheat, a co-author of the study, tells Axios.

• The figure estimates costs under the current trade regime, which includes last month's U.S.-China negotiations.
• "As we approach the end of the pause on many steep tariff hikes that were announced on April 2nd, it has become increasingly urgent to understand which firms are the most exposed to potential costs," a companion report out Wednesday says.

 The report focuses on midsize businesses — those with annual revenues between $10 million and $1 billion, which are responsible for 1 in 3 private-sector jobs.

• The sector disproportionately relies on imports from countries with the highest Trump-imposed tariff rates, including China and other Asian nations.
• "They may be bigger than the very smallest businesses, but they're not the largest — and tariffs are of a magnitude that is not easily absorbed," Wheat says.

 Still unknown is which countries will once again face the tariffs announced in early April.

• Top Trump officials say that a flurry of trade deals will be announced in the days leading up to July 9, when the pause on those "Liberation Day" tariffs expires.
• The universal tariffs announced then, including triple-digit levies on Chinese goods, added $188 billion in direct import costs to midsize firms — more than 6 times the costs imposed by the earlier tariffs in place at the start of 2025.
• Put another way, that is 7% of total payroll, on average.

The uncertainty about how much firms might have to pay to import future goods has employers sitting on their hands.

President Donald Trump said Wednesday that the United States has struck a trade deal with Vietnam that includes a 20% tariff on the Southeast Asian country’s imports to the U.S.

Trump’s announcement on Truth Social said that the deal will give the U.S. tariff-free access to Vietnam’s markets.

Vietnam also agreed that goods would be hit with a 40% tariff rate if they originated in another country and were transferred to Vietnam for final shipment to the United States.

The process, known as transshipping, is used to circumvent trade barriers. China, a top exporter to the U.S., has reportedly used Vietnam as a transshipment hub.

Trump wrote that “Vietnam will pay” that 20% duty, but tariffs are taxes on foreign goods that are paid by the importers of those products.

The agreement was unveiled less than a week before a 90-day pause on many of Trump’s so-called reciprocal tariffs was set to expire, sending U.S. duties on imports from dozens of countries soaring.

Under that protectionist trade scheme, Vietnamese imports to the U.S. were subject to a 46% blanket tariff. That rate was lowered to 10% during the 90-day interim. Raising the tariff on Vietnamese goods to 20% will hike costs for U.S. importers, which could be passed on to consumers or suppliers.

The S&P 500 nevertheless rose slightly on news of the trade deal.

Read Trump’s full post:

“It is my Great Honor to announce that I have just made a Trade Deal with the Socialist Republic of Vietnam after speaking with To Lam, the Highly Respected General Secretary of the Communist Party of Vietnam. It will be a Great Deal of Cooperation between our two Countries. The Terms are that Vietnam will pay the United States a 20% Tariff on any and all goods sent into our Territory, and a 40% Tariff on any Transshipping. In return, Vietnam will do something that they have never done before: give the United States of America TOTAL ACCESS to their Markets for Trade. In other words, they will “OPEN THEIR MARKET TO THE UNITED STATES,” meaning that we will be able to sell our product into Vietnam at ZERO Tariff. It is my opinion that the SUV, or, as it is sometimes referred to, Large Engine Vehicle, which does so well in the United States, will be a wonderful addition to the various product lines within Vietnam. Dealing with General Secretary To Lam, which I did personally, was an absolute pleasure. Thank you for your attention to this matter!”

It was unclear from Trump’s post when the deal will take effect, or if it has been officially signed by both parties.

Trump has signaled that he may ignore or revise the upcoming deadline for his reciprocal tariffs to snap back higher. The 90-day pause, which lowered tariffs on nearly all other countries to a blanket 10% rate, was imposed in early April to give countries breathing room while they negotiate deals with the U.S.

With the deadline approaching, the Trump administration has only struck revised trade frameworks with China and the United Kingdom, though it has repeatedly said the U.S. is close to deals with numerous other countries.

Vietnam, whose exports to the U.S. reportedly comprised 30% of its gross domestic product last year, is especially vulnerable to Trump’s tariffs.

Critics of Trump’s unpredictable tariff policies warn that the duties create economic uncertainty and will result in higher prices for U.S. consumers. The Trump administration and its defenders counter that tariffs do not cause inflation and note that the president’s duties have brought in billions of dollars to the U.S. government.

A pricing model created for CNBC this month by retail consulting group AlixPartners found that a 10% U.S. tariff on Vietnamese goods would cause the price of an imported men’s sweater to rise by about 8%. Under the 46% tariff Trump initially slapped on Vietnam, the price of that same sweater would rise roughly 35%, the group found.

U.S. Federal Reserve Chairman Jerome Powell said Tuesday that officials expect the impacts of Trump’s tariffs will start to show up more during the summer months.

Prices on certain items, including apparel and footwear, are already ticking higher as a result of the tariffs, CNBC has reported.

Some analysts believe the lack of a widespread impact on U.S. prices so far is the result of pre-tariff stockpiling by companies, as well as the time it takes for those tariffs to show up in the economy.

Foxconn's Shift: A Move Towards Indian Manufacturing 🏭

In a significant development, Foxconn, Apple’s largest assembly partner, has directed over 300 Chinese employees to return to their home country from its iPhone factories in India. This shift leaves primarily Taiwanese support staff in India. While the official reason for this decision remains unclear, some reports suggest that Chinese regulators have been pushing for tighter controls on knowledge and technology from leaving the country, indicating a strategic move to maintain China's manufacturing dominance.

This change comes as Apple increases its manufacturing footprint in India to lessen its dependency on Chinese production, particularly amid global trade uncertainties. The approval of a $435 million semiconductor plant by the Indian government underscores Apple's commitment to expanding its presence in the region. This move not only aligns with the company's broader strategy but also symbolizes potential economic empowerment for India.

Key Takeaways:
- Chinese Exodus: Over 300 employees were recalled to China.
- Strategic Shift: Focus on Indian manufacturing to reduce reliance on China.
- Potential Growth: Investment in local infrastructure with the new semiconductor plant.