Layoffs and Job Reductions

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    Who’s to Blame for a Factory Shutdown: A Company, or California?

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    VERNON, Calif. — Teresa Robles begins her shift around dawn most days at a pork processing plant in an industrial corridor four miles south of downtown Los Angeles. She spends eight hours on her feet cutting tripe, a repetitive motion that has given her constant joint pain, but also a $17.85-an-hour income that supports her family.So in early June, when whispers began among the 1,800 workers that the facility would soon shut down, Ms. Robles, 57, hoped they were only rumors.“But it was true,” she said somberly at the end of a recent shift, “and now each day inches a little closer to my last day.”  The 436,000-square-foot factory, with roots dating back nearly a century, is scheduled to close early next year. Its Virginia-based owner, Smithfield Foods, says it will be cheaper to supply the region from factories in the Midwest than to continue operations here.“Unfortunately, the escalating costs of doing business in California required this decision,” said Shane Smith, the chief executive of Smithfield, citing utility rates and a voter-approved law regulating how pigs can be housed.Workers and company officials see a larger economic lesson in the impending shutdown. They just differ on what it is. To Ms. Robles, it is evidence that despite years of often perilous work, “we are just disposable to them.” For the meatpacker, it is a case of politics and regulation trumping commerce.The cost of doing business in California is a longtime point of contention. It was cited last year when Tesla, the electric-vehicle maker that has been a Silicon Valley success story, announced that it was moving its headquarters to Texas. “There’s a limit to how big you can scale in the Bay Area,” said Elon Musk, Tesla’s chief executive, mentioning housing prices and long commutes.As with many economic arguments, this one can take on a partisan hue.Around the time of Tesla’s exit, a report by the conservative-leaning Hoover Institution at Stanford University found that California-based companies were leaving at an accelerating rate. In the first six months of last year, 74 headquarters relocated from California, according to the report. In 2020, the report found, 62 companies were known to have relocated.Dee Dee Myers, a senior adviser to Gov. Gavin Newsom, a Democrat, counters by pointing to California’s continued economic growth.“Every time this narrative comes up, it’s consistently disproven by the facts,” said Ms. Myers, director of the Governor’s Office of Business and Economic Development. The nation’s gross domestic product grew at an annual pace of 2 percent over a five-year period through 2021, according to Ms. Myers’s office, while California’s grew by 3.7 percent. The state is still the country’s tech capital.Still, manufacturing has declined more rapidly in California than in the nation as a whole. Since 1990, the state has lost a third of its factory jobs — it now has roughly 1.3 million, according to the Bureau of Labor Statistics — compared with a 28 percent decline nationwide.The Smithfield plant is an icon of California’s industrial heyday. In 1931, Barney and Francis Clougherty, brothers who grew up in Los Angeles and the sons of Irish immigrants, started a meatpacking business that soon settled in Vernon. Their company, later branded as Farmer John, became a household name in Southern California, recognized for producing the beloved Dodger Dog and al pastor that sizzled at backyard cookouts. During World War II, the company supplied rations to U.S. troops in the Pacific.Leo Velasquez, 62, started working at the plant in 1990. He had hoped to stay there until he was ready to retire.Mark Abramson for The New York TimesAlmost 20 years later, Les Grimes, a Hollywood set painter, was commissioned to create a mural at the plant, transforming a bland industrial structure into a pastoral landscape where young children chased cherubic-looking pigs. It became a sightseeing destination.More recently, it has also been a symbol of the state’s social and political turbulence.In explaining Smithfield’s decision to close the plant, Mr. Smith, the chief executive, and other company officials have pointed to a 2018 statewide ballot measure, Proposition 12, which requires that pork sold in the state come from breeding pigs housed in spaces that allow them to move more freely.The measure is not yet being enforced and faces a challenge before the U.S. Supreme Court this fall. If it is not overturned, the law will apply even to meat packed outside the state — the way Smithfield now plans to supply the local market — but company officials say that in any case, its passage reflects a climate inhospitable to pork production in California.Passions have sometimes run high outside the plant as animal rights activists have condemned the confinement and treatment of the pigs being slaughtered inside. Protesters have serenaded and provided water to pigs whose snouts stuck out of slats in arriving trucks.In addition to its objections to Proposition 12, Smithfield maintains that the cost of utilities is nearly four times as high per head to produce pork in California than at the company’s 45 other plants around the country, though it declined to say how it arrived at that estimate.John Grant, president of the United Food and Commercial Workers Local 770, which represents Ms. Robles and other workers at the plant, said Smithfield announced the closing just as the sides were to begin negotiating a new contract. “They’re kicking us out with no answers,” said Teresa Robles, who has worked at the factory for four years.Mark Abramson for The New York Times“A total gut punch and, frankly, a shock,” said Mr. Grant, who worked at the plant in the 1970s. He said wage increases were a priority for the union going into negotiations. The company has offered a $7,500 bonus to employees who stay through the closing and has raised the hourly wage, previously $19.10 at the top of the scale, to $23.10. (The rate at the company’s unionized Midwest plants is still a bit higher.)But Mr. Grant said the factory shutdown was an affront to his members, who toiled through the pandemic as essential workers. Smithfield was fined nearly $60,000 by California regulators in 2020 for failing to take adequate measures to protect workers from contracting coronavirus.“After all that the employees have done throughout the pandemic, they’re now all of a sudden going to flee? They’re destroying lives,” said Mr. Grant, adding that the union is working to find new jobs for workers and hopes to help find a buyer for the plant.Karen Chapple, a professor of city and regional planning at the University of California, Berkeley, said the closing was an example of “the larger trend of deindustrialization” in areas like Los Angeles. “It probably doesn’t make sense to be here from an efficiency perspective,” she said. “It’s the tail end of a long exodus.”Indeed, the number of food manufacturing jobs in Los Angeles County has declined 6 percent since 2017, according to state data.  And as those jobs are shed, workers like Ms. Robles wonder what will come next.More than 80 percent of the employees at the Smithfield plant are Latino — a mix of immigrants and first-generation native-born. Most are older than 50. The security and benefits have kept people in their jobs, union leaders say, but the nature of the labor has made it hard to recruit younger workers who have better alternatives.On a recent overcast morning, the air in Vernon was thick with the smell of ammonia. Workers wearing surgical masks and carrying goggles and helmets walked into the plant. The sound of forklifts hummed beyond a high fence.Massive warehouses line the streets in the area. Some sit vacant; others produce wholesale local baked goods and candies. Mario Melendez, who has worked at the plant for a decade, says he feels betrayed by the company.Mark Abramson for The New York TimesMs. Robles started at the Smithfield plant four years ago. For more than two decades she owned a small business selling produce in downtown Los Angeles. She loved her work, but when her brother died in 2018, she needed money to honor his wish to have his body sent from Southern California to Colima, Mexico, their hometown. She sold the business for a couple of thousand dollars, then started at the factory, making $14 an hour.“I was proud,” she said, recalling the early months at her new job.Ms. Robles is the sole provider for her family. Her husband has several health complications, including surviving a heart attack in recent months, so she now shoulders the $2,000 mortgage payment for their home in the Watts neighborhood of Los Angeles. Sometimes her 20-year-old son, who recently started working at the plant, helps with expenses.“But this is my responsibility — it is on me to provide,” she said.Ms. Robles has long recited the Lord’s Prayer every night before bed, and now she often finds herself repeating it throughout the day for strength.“They’re kicking us out with no answers,” she said.Other workers, like Mario Melendez, 67, who has worked at the plant for a decade, shares that unmoored feeling.It’s an honor to know his labor helps feed people across Southern California, he said — especially around the holidays, when the factory’s ribs, ham and hot dogs will be part of people’s celebrations.But the factory is also a place where he contracted coronavirus, which he passed along to his brother, who died of the virus, as did his mother. He was devastated.A truck carrying pigs entering the plant. Animal rights activists have sometimes protested outside.Mark Abramson for The New York Times“A terrible shock,” said Mr. Melendez, who says he feels betrayed by the company.So does Leo Velasquez.He started on the night shift in 1990, making $7 an hour to package and seal bacon. A few years later, he moved to days, working 10-hour shifts.“I’ve given my life to this place,” said Mr. Velasquez, 62.Over the years, his body began to wear down. In 2014, he had shoulder replacement surgery. Still, he had hoped to continue at the factory until he was ready to retire.“That’s not going to happen,” he said. “Where I go from here, I do not know.” More

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    Is the U.S. Entering a Recession? Here’s Why It’s Hard to Say.

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    The U.S. may register a second straight quarter of economic contraction, one benchmark of a recession. But that won’t be the last word.The United States is not in a recession.Probably.Economic output, as measured by gross domestic product, fell in the first quarter of the year. Government data due this week may show that it fell in the second quarter as well. Such a two-quarter decline would meet a common, though unofficial, definition of a recession.Most economists still don’t think the United States meets the formal definition, which is based on a broader set of indicators, including measures of income, spending and job growth. But they aren’t quite as sure as they were a few weeks ago. The housing market has slowed sharply, income and spending are struggling to keep pace with inflation, and a closely watched measure of layoffs has begun to creep up.“A month ago, I was writing that it was very unlikely that we are in a recession,” said Jeffrey Frankel, a Harvard economist. “If I had to write that now, I would take out the ‘very.’”

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    Change in select recession indicators since February 2020
    Notes: Production and job data are through June. Income and spending are through May and are adjusted for inflation. Income data excludes government transfer payments. All figures are seasonally adjusted.Sources: Commerce Department, Labor Department and Federal Reserve, via FREDBy The New York TimesMr. Frankel served until 2019 on the Business Cycle Dating Committee of the National Bureau of Economic Research, the semiofficial arbiter of when recessions begin and end in the United States. The committee tries to be definitive, which means it typically waits as much as a year to declare that a recession has begun, long after most independent economists have reached that conclusion. In other words, even if we are already in a recession, we might not know it — or, at least, might not have official confirmation of it — until next year.In the meantime, economists agree that the risks of a recession are rising. The Federal Reserve is raising rates aggressively to try to tame inflation, which has already contributed to large declines in the stock market and a steep drop in home construction and sales. Higher borrowing costs are all but certain to lead to slower spending by consumers, reduced investment by businesses and, eventually, slower hiring and more layoffs — all hallmarks of an economic downturn.“Are we in a recession? We don’t think so yet. Are we going to be in one? It’s a high risk,” said Joel Prakken, chief U.S. economist for S&P Global Market Intelligence.But the U.S. economy still has important sources of strength. Unemployment is low, job growth is robust, and households, in the aggregate, have lots of money in savings and relatively little debt. “The narrative that the economy has slowed quite a bit and is showing signs of deterioration from higher inflation and higher interest rates, that narrative is solid,” said Ellen Zentner, chief U.S. economist for Morgan Stanley. “But when you look at factors like jobs, where we’re still creating three to four hundred thousand jobs a month, with an unemployment rate that has not begun to show signs of sustained increases, and the cushions of excess savings, healthy household balance sheets — these are things that go far in keeping the U.S. out of recession, or at least staving off recession for longer.”What is a recession?Americans feel terrible about the economy right now — worse, at least by some measures, than at the peak of the pandemic-related layoffs in spring of 2020. It’s easy to understand why: The climbing cost of food, fuel and other essentials is eroding living standards. Hourly earnings, adjusted for inflation, are falling at their fastest pace in decades.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    America’s Safety Net for Workers Hurt by Globalization Is Falling Apart

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    A 60-year-old program that provides retraining to workers whose jobs are eliminated because of foreign competition has expired, leaving many at risk.WASHINGTON — In September, the lighting factory in Logan, Ohio, where Jeff Ogg has clocked in nearly every day for the last 37 years, will shut its doors, driven out of business by a shift from fluorescent lighting toward LED technology that is often made cheaply in China.At 57, Mr. Ogg is not yet ready to retire. But when he applied to a national retraining program that helps workers who have lost their jobs to foreign competition, he was dismayed to see his application rejected. A follow-up request for reconsideration was immediately denied.The program that Mr. Ogg looked to for help, known as Trade Adjustment Assistance, has for the past 60 years been America’s main antidote to the pressures that globalization has unleashed on its workers. More than five million workers have participated in the program.But a lack of congressional funding has put the program in jeopardy: Trade assistance was officially terminated on July 1, though it continues to temporarily serve current enrollees. Unless Congress approves new money for the $700 million program, it will cease to exist entirely.Established in 1962, trade assistance was intended to help workers whose factory and other jobs were increasingly moving overseas as companies chased cheap labor outside the United States. It provides services like subsidies for retraining, job search assistance, health coverage tax credits and allowances for relocation.But the benefits have been gradually scaled back given a lack of funding, including limiting who qualifies for assistance. A year ago, the program was restricted to workers who make goods, even though jobs in services have also undergone a wave of offshoring as companies set up call centers and accounting departments overseas. In addition, only those whose jobs shifted to countries that have a free-trade agreement with the United States — like Canada and Mexico, but not China — were eligible for assistance.On July 1, the program stopped reviewing new applications and appeals from workers whose applications have been rejected, and it will be phased out.While often criticized as inefficient and bureaucratic, the program has been the country’s primary answer to trade competition for decades. Its disappearance may leave thousands of workers without critical support as they seek new jobs. In 2021, the Department of Labor certified 801 petitions for trade adjustment assistance from various workplaces, covering an estimated 107,454 American workers.The decision over whether to reauthorize the program has become a casualty of an intense fight in Congress over what to include in a sprawling bill aimed at making America more competitive with China. The centerpiece of the legislation is $52 billion in funding for semiconductor manufacturing in the United States, but lawmakers have been clashing over whether to include other provisions related to trade, such as funding for worker retraining.House Democrats had proposed including other trade provisions as well, including measures to increase scrutiny on investments that might send American technology overseas and eliminate tariff exemptions for small-value goods imported from China.The State of Jobs in the United StatesJob gains continue to maintain their impressive run, easing worries of an economic slowdown but complicating efforts to fight inflation.June Jobs Report: U.S. employers added 372,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the sixth month of 2022.Care Worker Shortages: A lack of child care and elder care options is forcing some women to limit their hours or has sidelined them altogether, hurting their career prospects.Downsides of a Hot Market: Students are forgoing degrees in favor of the attractive positions offered by employers desperate to hire. That could come back to haunt them.Slowing Down: Economists and policymakers are beginning to argue that what the economy needs right now is less hiring and less wage growth. Here’s why.On Tuesday, the Senate voted to advance a smaller legislative package that includes funding for the chips industry and broader research and development, but lacks funding for Trade Adjustment Assistance or other trade-related measures. The chips legislation will still require further approval in both the House and Senate.Supporters of Trade Adjustment Assistance say that they will not stop pushing for its reauthorization, and that funding for the program could still be included in other legislation.Senator Sherrod Brown, Democrat from Ohio, blamed Republican lawmakers for “holding T.A.A. hostage” and said he would continue fighting to reauthorize the program.“They have sold out American manufacturing over and over by voting for trade deals and tax policy that send jobs overseas, and continue to block investments to empower workers who lose their jobs because of those bad trade deals,” Mr. Brown said in emailed remarks. “T.A.A. serves workers — like those in Logan, Ohio — who have their lives upended through no fault of their own.”The program and its benefits are already out of reach for Mr. Ogg and 50 others who work at the Logan plant, which manufactures the glass tubes in fluorescent lighting fixtures that were once ubiquitous in schools and offices. The plant tried to transition to making LED lights in recent years, but found those lights could be purchased more cheaply from abroad.“Our plant, our people, most of them have been there 25-plus years,” said Mr. Ogg, who is the president of the local United Steelworkers union. “You work in the same place that long, that’s all you know.”Mr. Ogg said he had no complaints about his career at the plant, where he estimates the average wage is between $25 and $30 an hour — enough for him to buy a home and raise three children. But he’s feeling unsure about what to do next. He previously worked as a mechanic, but said the type of machinery that he had worked on was no longer around.“A lot has changed,” Mr. Ogg added. “If you’ve been stuck in one place for 30-some years, you’re going to need some help to go to the next level.”Trade Adjustment Assistance was intended to do just that — help workers who need new skills to compete in a more globalized economy. The program offered income support to workers who lost their jobs and exhausted unemployment benefits while they retrained for other jobs. Those who are 50 and older and take on lower-paying jobs could qualify for a wage insurance program that temporarily boosted their take-home pay.Some academic research has found benefits for those who enrolled in the program. Workers gave up about $10,000 in income while training, but 10 years later they had about $50,000 higher cumulative earnings than those who did not retrain, according to research from 2018 by Benjamin G. Hyman, an economist at the Federal Reserve Bank of New York.Still, those relative gains decayed over time, Mr. Hyman’s research shows. After 10 years the incomes of those who received assistance and those who did not were the same — perhaps because the jobs that workers in T.A.A. trained for had also become obsolete as a result of automation and trade competition. Yet Mr. Hyman concluded that earnings returns from the program “may be larger and more effective than previously thought.”The United Steelworkers Local 1999 in Indianapolis, which fought to save manufacturing jobs from companies like Rexnord, which moved its operations to Mexico in 2017.Alyssa Schukar for The New York TimesThe program fell victim to concerns over its expense and efficiency, as well as what was left out of the broader package of trade legislation. In the past, the funding for the program was coupled with something called Trade Promotion Authority, which streamlined the process for congressional approval of U.S. trade agreements.The combination of Trade Promotion Authority and Trade Adjustment Assistance was a political formula that worked for decades, said Edward Alden, a senior fellow at the Council on Fore­­­ign Relations. Presidents promised businesses more access to foreign markets, and they made commitments to providing labor unions and their supporters with compensation if jobs were lost in the process.But American views on trade have turned more negative in recent years, as China began dominating global industries and as income inequality widened. Democrats have grown so disillusioned with the effects of global trade and split over its benefits that the Biden administration has declined to push for new pacts.Before writing any new trade deals, Mr. Biden said he would first focus on boosting American competitiveness, including by investing in infrastructure, clean energy, and research and development. And when Trade Promotion Authority expired last year, Biden administration officials did not lobby Congress to reauthorize it.Some Republicans are balking at reapproving trade adjustment assistance when the president shows little intention to open up new overseas business opportunities through trade agreements.“America’s on the sidelines right now on trade, and President Biden’s moratorium on new trade agreements seems firm,” Representative Kevin Brady, Republican of Texas, told reporters late last month. “There would have to be a much stronger ironclad commitment to resuming American leadership in trade to even begin this discussion on extending T.A.A.”“We’re open to creative ideas here, but if we don’t have a serious, significant trade agenda that opens up markets for American workers, T.A.A. doesn’t make much sense,” Mr. Brady added.Mr. Biden’s plans to boost American competitiveness have only been partly fulfilled. While Congress approved billions of dollars for new infrastructure investments, other aspects of the president’s domestic agenda, including funding for the energy transition, have crumbled. Lawmakers have struggled to amass the support even for legislation in favor of expanded funding for the semiconductor industry, which is widely seen as key to American industry and national security.With so many other legislative goals at stake, the termination of a decades-old solution to the economic trade-offs of free trade has garnered little attention.“The old consensus on trade is gone,” said Mr. Alden of the Council on Foreign Relations. “And we don’t have a new one.”Catie Edmondson More

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    Loans Could Burn Start-Up Workers in Downturn

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    SAN FRANCISCO — Last year, Bolt Financial, a payments start-up, began a new program for its employees. They owned stock options in the company, some worth millions of dollars on paper, but couldn’t touch that money until Bolt sold or went public. So Bolt began providing them with loans — some reaching hundreds of thousands of dollars — against the value of their stock.In May, Bolt laid off 200 workers. That set off a 90-day period for those who had taken out the loans to pay the money back. The company tried to help them figure out options for repayment, said a person with knowledge of the situation who spoke anonymously because the person was not authorized to speak publicly.Bolt’s program was the most extreme example of a burgeoning ecosystem of loans for workers at privately held tech start-ups. In recent years, companies such as Quid and Secfi have sprung up to offer loans or other forms of financing to start-up employees, using the value of their private company shares as a sort of collateral. These providers estimate that start-up employees around the world hold at least $1 trillion in equity to lend against.But as the start-up economy now deflates, buffeted by economic uncertainty, soaring inflation and rising interest rates, Bolt’s situation serves as a warning about the precariousness of these loans. While most of them are structured to be forgiven if a start-up fails, employees could still face a tax bill because the loan forgiveness is treated as taxable income. And in situations like Bolt’s, the loans may be difficult to repay on short notice.“No one’s been thinking about what happens when things go down,” said Rick Heitzmann, an investor at FirstMark Capital. “Everyone’s only thinking about the upside.”The proliferation of these loans has ignited a debate in Silicon Valley. Proponents said the loans were necessary for employees to participate in tech’s wealth-creation engine. But critics said the loans created needless risk in an already-risky industry and were reminiscent of the dot-com era in the early 2000s, when many tech workers were badly burned by loans related to their stock options.Ted Wang, a former start-up lawyer and an investor at Cowboy Ventures, was so alarmed by the loans that he published a blog post in 2014, “Playing With Fire,” advising against them for most people. Mr. Wang said he got a fresh round of calls about the loans anytime the market overheated and always felt obligated to explain the risks.“I’ve seen this go wrong, bad wrong,” he wrote in his blog post.Start-up loans stem from the way workers are typically paid. As part of their compensation, most employees at privately held tech companies receive stock options. The options must eventually be exercised, or bought at a set price, to own the stock. Once someone owns the shares, he or she cannot usually cash them out until the start-up goes public or sells.That’s where loans and other financing options come in. Start-up stock is used as a form of collateral for these cash advances. The loans vary in structure, but most providers charge interest and take a percentage of the worker’s stock when the company sells or goes public. Some are structured as contracts or investments. Unlike the loans offered by Bolt, most are known as “nonrecourse” loans, meaning employees are not on the hook to repay them if their stock loses its value.This lending industry has boomed in recent years. Many of the providers were created in the mid-2010s as hot start-ups like Uber and Airbnb put off initial public offerings of stock as long as they could, hitting private market valuations in the tens of billions of dollars.That meant many of their workers were bound by “golden handcuffs,” unable to leave their jobs because their stock options had become so valuable that they could not afford to pay the taxes, based on the current market value, on exercising them. Others became tired of sitting on the options while they waited for their companies to go public.The loans have given start-up employees cash to use in the meantime, including money to cover the costs of buying their stock options. Even so, many tech workers do not always understand the intricacies of equity compensation.“We work with supersmart Stanford computer science A.I. graduates, but no one explains it to them,” said Oren Barzilai, chief executive of Equitybee, a site that helps start-up workers find investors for their stock. Secfi, a provider of financing and other services, has now issued $700 million of cash financing to start-up workers since it opened in 2017. Quid has issued hundreds of millions’ worth of loans and other financing to hundreds of people since 2016. Its latest $320 million fund is backed by institutions, including Oaktree Capital Management, and it charges those who take out loans the origination fees and interest.So far, less than 2 percent of Quid’s loans have been underwater, meaning the market value of the stock has fallen below that of the loan, said Josh Berman, a founder of the company. Secfi said that 35 percent of its loans and financing had been fully paid back, and that its loss rate was 2 to 3 percent.But Frederik Mijnhardt, Secfi’s chief executive, predicted that the next six to 12 months could be difficult for tech workers if their stock options decline in value in a downturn but they had taken out loans at a higher value.“Employees could be facing a reckoning,” he said.Such loans have become more popular in recent years, said J.T. Forbus, an accountant at Bogdan & Frasco who works with start-up employees. A big reason is that traditional banks won’t lend against start-up equity. “There’s too much risk,” he said.Start-up employees pay $60 billion a year to exercise their stock options, Equitybee estimated. For various reasons, including an inability to afford them, more than half the options issued are never exercised, meaning the workers abandon part of their compensation. Mr. Forbus said he’d had to carefully explain the terms of such deals to his clients. “The contracts are very difficult to understand, and they don’t really play out the math,” he said. Some start-up workers regret taking the loans. Grant Lee, 39, spent five years working at Optimizely, a software start-up, accumulating stock options worth millions. When he left the company in 2018, he had a choice to buy his options or forfeit them. He decided to exercise them, taking out a $400,000 loan to help with the cost and taxes.In 2020, Optimizely was acquired by Episerver, a Swedish software company, for a price that was lower than its last private valuation of $1.1 billion. That meant the stock options held by employees at the higher valuation were worth less. For Mr. Lee, the value of his Optimizely stock fell below that of the loan he had taken out. While his loan was forgiven, he still owed around $15,000 in taxes since loan forgiveness counts as taxable income.“I got nothing, and on top of that, I had to pay taxes for getting nothing,” he said.The office of Envoy, a start-up that makes workplace software, in San Francisco. The company began a loan program in May.Lauren Segal for The New York TimesOther companies use the loans to give their workers more flexibility. In May, Envoy, a San Francisco start-up that makes workplace software, used Quid to offer nonrecourse loans to dozens of its employees so they could get cash then. Envoy, which was recently valued at $1.4 billion, did not encourage or discourage people from taking the loans, said Larry Gadea, the chief executive.“If people believe in the company and want to double down on it and see how much better they can do, this is a great option,” he said.In a downturn, loan terms may become more onerous. The I.P.O. market is frozen, pushing potential payoffs further into the future, and the depressed stock market means private start-up shares are probably worth less than they were during boom times, especially in the last two years.Quid is adding more underwriters to help find the proper value for the start-up stock it lends against. “We’re being more conservative than we have in the past,” Mr. Berman said.Bolt appears to be a rarity in that it offered high-risk personal recourse loans to all its employees. Ryan Breslow, Bolt’s founder, announced the program with a congratulatory flourish on Twitter in February, writing that it showed “we simply CARE more about our employees than most.”The company’s program was meant to help employees afford exercising their shares and cut down on taxes, he said.Bolt declined to comment on how many laid-off employees had been affected by the loan paybacks. It offered employees the choice of giving their start-up shares back to the company to repay their loans. Business Insider reported earlier on the offer.Mr. Breslow, who stepped down as Bolt’s chief executive in February, did not respond to a request for comment on the layoffs and loans.In recent months, he has helped found Prysm, a provider of nonrecourse loans for start-up equity. In pitch materials sent to investors that were viewed by The New York Times, Prysm, which did not respond to a request for comment, advertised Mr. Breslow as its first customer. Borrowing against the value of his stock in Bolt, the presentation said, Mr. Breslow took a loan for $100 million. More

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    Start-Up Funding Falls the Most It Has Since 2019

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    SAN FRANCISCO — For the first time in three years, start-up funding is dropping.The numbers are stark. Investments in U.S. tech start-ups plunged 23 percent over the last three months, to $62.3 billion, the steepest fall since 2019, according to figures released on Thursday by PitchBook, which tracks young companies. Even worse, in the first six months of the year, start-up sales and initial public offerings — the primary ways these companies return cash to investors — plummeted 88 percent, to $49 billion, from a year ago.The declines are a rarity in the start-up ecosystem, which enjoyed more than a decade of outsize growth fueled by a booming economy, low interest rates and people using more and more technology, from smartphones to apps to artificial intelligence. That surge produced now-household names such as Airbnb and Instacart. Over the past decade, quarterly funding to high growth start-ups fell just seven times.But as rising interest rates, inflation and uncertainty stemming from the war in Ukraine have cast a pall over the global economy this year, young tech companies have gotten hit. And that foreshadows a difficult period for the tech industry, which relies on start-ups in Silicon Valley and beyond to provide the next big innovation and growth engine.“We’ve been in a long bull market,” said Kirsten Green, an investor with Forerunner Ventures, adding that the pullback was partly a reaction to that frenzied period of dealmaking, as well as to macroeconomic uncertainty. “What we’re doing right now is calming things down and cutting out some of the noise.”The start-up industry still has plenty of money behind it, and no collapse is imminent. Investors continue to do deals, funding 4,457 transactions in the last three months, up 4 percent from a year ago, according to PitchBook. Venture capital firms, including Andreessen Horowitz and Sequoia Capital, are also still raising large new funds that can be deployed into young companies, collecting $122 billion in commitments so far this year, PitchBook said.The State of the Stock MarketThe stock market’s decline this year has been painful. And it remains difficult to predict what is in store for the future.Grim Outlook: The stock market is on track for its worst first six months of the year since at least 1970. And that’s only part of the horror story for investors and companies this year.Advice for Investors: Bear markets and recessions are far more common than many people realize. Being prepared can minimize hardship and even offer investing opportunities, our columnist says.Recession Risks: As investors focus on the threat that inflation and higher interest rates pose to the economy, they are betting that volatility is here to stay.Crypto Meltdown: Amid a dire period for digital currencies, crypto companies are laying off staff and freezing withdrawals, raising questions about the health of the ecosystem.Start-ups are also accustomed to the boy who cried wolf. Over the last decade, various blips in the market have led to predictions that tech was in a bubble that would soon burst. Each time, tech bounced back even stronger, and more money poured in.Even so, the warning signs that all is not well have recently become more prominent.Venture capitalists, such as those at Sequoia Capital and Lightspeed Venture Partners, have cautioned young firms to cut costs, conserve cash and prepare for hard times. In response, many start-ups have laid off workers and instituted hiring freezes. Some companies — including the payments start-up Fast, the home design company Modsy and the travel start-up WanderJaunt — have shut down.Shares of Bird Global, the scooter start-up, have tumbled from a high last year.Tara Pixley for The New York TimesThe pain has also reached young companies that went public in the last two years. Shares of onetime start-up darlings like the stocks app Robinhood, the scooter start-up Bird Global and the cryptocurrency exchange Coinbase have tumbled between 86 percent and 95 percent below their highs from the last year. Enjoy Technology, a retail start-up that went public in October, filed for bankruptcy last week. Electric Last Mile Solutions, an electric vehicle start-up that went public in June 2021, said last month that it would liquidate its assets.Kyle Stanford, an analyst with PitchBook, said the difference this year was that the huge checks and soaring valuations of 2021 were not happening. “Those were unsustainable,” he said.The start-up market has now reached a kind of stalemate — particularly for the largest and most mature companies — which has led to a lack of action in new funding, said Mark Goldberg, an investor at Index Ventures. Many start-up founders don’t want to raise money these days at a price that values their company lower than it was once worth, while investors don’t want to pay the elevated prices of last year, he said. The result is stasis.“It’s pretty much frozen,” Mr. Goldberg said.Additionally, so many start-ups collected huge piles of cash during the recent boom times that few have needed to raise money this year, he said. That could change next year, when some of the companies start running low on cash. “The logjam will break at some point,” he said.David Spreng, an investor at Runway Growth Capital, a venture debt investment firm, said he had seen a disconnect between investors and start-up executives over the state of the market.“Pretty much every V.C. is sounding alarm bells,” he said. But, he added, “the management teams we’re talking to, they all seem to think: We’ll be fine, no worries.”The one thing he has seen every company do, he said, is freeze its hiring. “When we start seeing companies miss their revenue goals, then it’s time to get a little worried,” he said.Still, the huge piles of capital that venture capital firms have accumulated to back new start-ups has given many in the industry confidence that it will avoid a major collapse.“When the spigot turns back on, V.C. will be set up to get back to putting a lot of capital back to work,” Mr. Stanford said. “If the broader economic climate doesn’t get worse.” More

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    Job Openings Eased, in a Sign of the Cooling Labor Market

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    Employers became slightly less desperate for workers in May as job openings declined for the second straight month from a record high in March.The number of open positions fell to 11.3 million, down from an upwardly revised 11.6 million in April, the Labor Department said Wednesday in the monthly Job Openings and Labor Turnover Survey. That still leaves nearly two jobs available for every unemployed person in the United States.The job openings rate jumped in retail, hotels and restaurants as Americans returned to summer leisure spending and employers struggled to keep up.By most indications, the labor market has remained very strong, with initial claims for unemployment insurance only inching up in recent months. In the May survey, the share of the work force quitting jobs remained steady, as did the share who were laid off.Concern over finding enough qualified workers increased among business leaders in the second quarter of the year, according to a survey of chief financial officers by the Federal Reserve Bank of Richmond.“The labor shortage is absolutely top of mind for every industry I talk to,” said Dave Gilbertson, vice president of UKG, the payroll and shift management software company, which monitors four million hourly workers. “Every single one of them is struggling to hire. So far I haven’t seen job openings come down. A lot of those jobs have been open for a long time.”The Federal Reserve has been trying to stem inflation by using interest rates to slow down business activity just enough that the shortfall of workers becomes less of a constraint on productive capacity, but without throwing large numbers of people out of work. The gradual decrease in job openings, while layoffs remain low, is evidence that its strategy may be working. More

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    Mark Zuckerberg Prepares Meta Employees for a Tougher 2022

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    In an internal meeting this week, Mr. Zuckerberg said the tech giant was facing one of the “worst downturns that we’ve seen in recent history.”SAN FRANCISCO — Mark Zuckerberg has a message for Meta employees: Buckle up for tough times ahead.At an internal meeting on Thursday, Mr. Zuckerberg, the chief executive of Meta, said the Silicon Valley company was facing one of the “worst downturns that we’ve seen in recent history,” according to copies of his comments that were shared with The New York Times. He told Meta’s 77,800 workers that they should prepare to do more work with fewer resources and that their performances would be graded more intensely than previously.Mr. Zuckerberg added that the company — which owns Facebook, Instagram and other apps — was lowering its hiring targets. Meta now plans to bring on 6,000 to 7,000 new engineers this year, down from a previous goal of around 10,000, he said. In some areas, hiring will pause entirely, especially of junior engineers, though the head count will increase in other parts of the business, he said.“I think some of you might decide that this place isn’t for you, and that self-selection is OK with me,” Mr. Zuckerberg said on the call. “Realistically, there are probably a bunch of people at the company who shouldn’t be here.”The C.E.O.’s comments, which were some of the most sharply worded ones he has made to employees, reflect the degree of difficulty that Meta is facing with its business. The company, which for years went from strength to strength financially, has been in an unfamiliar position this year as it has struggled. While it enjoyed strong growth in the early parts of the pandemic, it has more recently grappled with upheaval in the global economy as inflation and interest rates rise.That economic uncertainty is hitting as Meta navigates tumult in its core social networking and advertising business. Mr. Zuckerberg declared last year that his company, which was renamed Meta from Facebook, was making a long-term bet to build the immersive world of the so-called metaverse. He has been spending billions of dollars on the effort, which has dragged down Meta’s profits.The company is also dealing with a blow to its advertising business after Apple made privacy changes to its mobile operating system that limit the amount of data that Facebook and Instagram can collect on its users.As a result, Meta has posted back-to-back profit declines this year, the first time that has happened in over a decade. In February, after a dismal financial report, Meta’s stock plummeted 26 percent and its market value plunged more than $230 billion in what was the company’s biggest one-day wipeout. In March, the company told employees that it was cutting back or eliminating free services like laundry and dry cleaning.In a memo to employees on Thursday, Chris Cox, Meta’s chief product officer, echoed Mr. Zuckerberg’s sentiments and said the company was in “serious times” and that economic “headwinds are fierce,” according to a copy of the memo that was read to The Times.“We need to execute flawlessly in an environment of slower growth, where teams should not expect vast influxes of new engineers and budgets,” Mr. Cox’s memo said. “We must prioritize more ruthlessly, be thoughtful about measuring and understanding what drives impact, invest in developer efficiency and velocity inside the company, and operate leaner, meaner, better executing teams.”Mr. Zuckerberg’s and Mr. Cox’s comments to employees were reported earlier by Reuters. A Meta spokesman said that Mr. Cox’s memo echoed what the company has said publicly in earnings calls and that it was being frank about its “challenges” and “opportunities.”In the internal meeting on Thursday, which was held via videoconference, Mr. Zuckerberg’s comments appeared to come out of a sense of frustration, according to one employee who watched the call. After someone asked whether the company would continue having “Meta Days” in 2022, an internal name for paid-time-off holidays, Mr. Zuckerberg paused and mulled aloud about how to answer the question appropriately, said the employee, who spoke anonymously because they were not authorized to speak.The C.E.O. then said the company needed to crack down and work harder than it had before, “turning up the heat” on internal goals and metrics used to rate employees’ performance. He said he expected some degree of turnover from employees who were not meeting those goals and that some might leave as a result of the intensified pace.But Mr. Zuckerberg noted that he was not averse to spending heavily on projects that matter for the long term and was not focused solely on profits. He cited the efforts on building the metaverse with virtual and augmented reality products over the next 10-plus years.Mr. Cox in his memo also said that Meta was continuing to focus on investing in Reels — the TikTok-like video product featured heavily in Instagram — as well as improving artificial intelligence to help drive the discovery of popular posts across Facebook and Instagram. Meta is also working on making money from its messaging apps and looking to more opportunities in e-commerce sales across the platform, he said.Internal recruiters at Meta said that after a surge of new hires during the pandemic, the company’s recruiting slowed this year. The company was mostly hiring for vital positions, and many roles were being filled internally, said two recruiters who spoke on condition of anonymity because they were not authorized to speak to reporters.There are no current plans to lay people off, two people with knowledge of the company’s plans said, who spoke anonymously because they were not authorized to speak. In chat room channels that accompanied the live broadcast of the employee meeting, some workers said they were celebrating cutting the “dead weight” after feeling that the “bar was lowered” for hiring over the course of the pandemic, according to comments that were described to The Times by one of the employees. More

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    Inflation Expected to Remain High Even as Economy Slows and Layoffs Rise

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    Kat Johnston didn’t expect the pandemic to make her less stressed about her finances. After all, she temporarily lost her job at the library where she worked full time. But, like many Americans, she found an unexpected reprieve from money worries: Months at home limited her spending, and she received expanded unemployment insurance and two one-time checks from the government.“When I first came back to work, I had probably $2,200 in savings — which I know is not much, but it’s more than I’d had in a while,” she said. But it was no match for the inflation that has come since. “That savings is pretty much gone now. As things have gotten so expensive, it’s been almost a paycheck-to-paycheck life.”Ms. Johnston, 31, lives in the Dallas area in a studio apartment and had hoped to upgrade to a one-bedroom — her cat will occasionally use her bed as a litter box, so being able to shut the door would be good. Yet rent is increasing enough that she is considering moving in with a roommate instead.Gas is so expensive that she is buying just a quarter of a tank at a time. Her $65,000 in student loans from undergraduate and graduate school were in forbearance before the pandemic because she was struggling to afford them on her roughly $40,000 annual income. She has been able to continue not paying them because of a government moratorium, but she knows that may not last forever.She’d like to find a better-paying job, but she’s unsure about leaving a secure position — and embarking on a draining job search — at a moment when economists and investors warn of an impending recession. “It does feel like whatever I was thinking I was going to do is on hold,” she said.Kat Johnston has returned to work full time but her savings are depleted and she is thinking about getting a roommate as rents in the Dallas area climb sharply.Dylan Hollingsworth for The New York TimesMillions of Americans are feeling similarly stuck as their savings run low and their cost of living runs high. Now, the economy appears poised to slow — potentially sharply — in ways that could limit wage growth and cause job losses even as prices remain elevated. But instead of rushing to the economy’s aid by giving Americans money, as they did in March 2020, policymakers are engineering this slowdown. Then, the problem was a global pandemic; now, it’s stubbornly high inflation, and the main way the government knows to solve that is by inflicting some economic pain.In other words, the long-predicted “cliff” may finally have arrived.When the first round of pandemic aid programs began to expire in the summer of 2020, economists warned of a looming cliff facing both Americans who still needed government help and the pandemic-addled economy that was not yet ready to stand on its own. They repeated those warnings last fall, when Congress allowed unemployment benefits to expire for millions of workers, and again in January, when monthly payments for families with children came to an end.The loss of those programs and others, including enhanced nutrition benefits, was painful for many families. But for the economy as a whole, the cliffs turned out to be more like potholes. Consumers kept on spending, in part because trillions in government aid had allowed many Americans to build up at least a small financial buffer — as Ms. Johnston did — and in part because a record-setting recovery in the job market gave workers an income boost that helped offset the loss in government aid.Now, as savings run dry and consumers struggle under the weight of higher prices and rising interest rates, early cracks are beginning to show — and are likely to widen from here.Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Greedflation: Some experts contend that big corporations are supercharging inflation by jacking up prices. We take a closer look at the issue. Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.For Investors: At last, interest rates for money market funds have started to rise. But inflation means that in real terms, you’re still losing money.Pay gains have been falling behind inflation for months. Credit card balances, which fell early in the pandemic, are rising toward a record high. Subprime borrowers — those with weak credit scores — are increasingly falling behind on payments on car loans in particular, credit bureau data show. Measures of hunger are rising, even with unemployment still low and the overall economy still strong.“It’s a grim picture already,” said Elizabeth Ananat, an economist at Barnard College who has studied the pandemic’s impact on low-income families. “Families are doing much worse than they were a few months ago.”Matrice Moore-Carr, a registrar at a public hospital in Nashville, Tenn., kept her job during the pandemic, and even managed to get a bit ahead, thanks to stimulus checks that helped her pay off her electric bill and stop worrying, at least for a little while, about whether she could afford gas for her car.When prices began to rise last year, Ms. Moore-Carr took on overtime shifts in the emergency room to make ends meet. When that wasn’t enough, she took a part-time job as a hotel receptionist. Now she is working seven days a week, often multiple jobs in one day, and still struggling to pay her bills.“That’s what’s been helping me keep the gas in the car and food on the table and the electricity going,” she said. “I’ve been making it work. I’m tired, I’ll tell you that. I’m so sleepy.”Ms. Moore-Carr, 52, owns her home, which she said is the only thing that allows her to keep living in Nashville, where both rents and home prices have soared in the pandemic. But the price of everything else has gone up — she joked about buying a horse to save on gas. On Tuesday, she stopped by the bank and turned in $47 in pennies.What she said she really worries about is the prospect of losing her overtime hours.“I don’t know what I’m going to do if anything gets any worse than it is now,” she said. “Am I going to have to cut my meals back? Am I going to have to eat once a day as opposed to three? I don’t know. It’s just tough.”Low-income households, at least on average, emerged from the first two years of the pandemic in remarkably strong financial shape. Trillions of dollars in government aid ensured that poverty fell in 2020, despite the loss of tens of millions of jobs. New rounds of assistance in 2021, including monthly payments through an expanded Child Tax Credit, led to a sharp drop in measures of childhood poverty and hunger. Those programs came from a very different economic moment, however. In 2020, and to a lesser degree in 2021, the needs of individual households and the needs of the broader economy were aligned: Stimulus checks and other forms of government aid helped jobless workers and their families avoid eviction, while at the same time helping businesses avoid bankruptcy, landlords avoid foreclosure, and cities and states avoid a collapse in their tax revenue.Today, that alignment has broken down. Giving people money now might help them pay their bills, but it could also make inflation worse by adding to demand as businesses are already failing to produce enough goods and hire enough workers.The Federal Reserve is instead trying to cool off the economy by raising interest rates, making it more expensive to borrow money to buy a house or expand a company. Weaker business activity will slow hiring, leading to slower wage growth and, most likely, more layoffs. It could also allow America’s goods and services — limited for more than a year by supply chain snarls and labor shortages — to catch up to demand, putting a damper on rising prices.Fed policymakers argue that this strategy is necessary to put the economy on a more sustainable path. But even as conditions take a turn for the worse, inflation will probably take a while to slow, and Fed officials themselves think it will still be elevated at the end of the year.“The transition is going to be very difficult,” said Seth Carpenter, global chief economist at Morgan Stanley and a former Fed economist. “At least historically, it takes a really long time for inflation to come down, even after the economy slows.”Even if the Fed can avoid causing a recession, a weakening labor market will bring hardship for many. Job losses can be devastating, often setting off a downward spiral of eviction and debt. Those who keep their jobs are likely to get fewer hours of work and to lose bargaining power.“Low-income workers, workers with low levels of education, Black and brown workers are the first to lose their jobs and the last to get them back,” said Diane Whitmore Schanzenbach, a Northwestern University economist who studies anti-poverty programs.Inflation F.A.Q.Card 1 of 5What is inflation? More