Rideshare giant Lyft announced on Thursday that it plans to lay off hundreds of workers as the prospect of a recession becomes increasingly likely.
Company co-founders John Zimmer and Logan Green revealed in a companywide email to staff that Lyft would be cutting some 700 jobs in an effort to bolster its business, which is facing soaring inflation and a slowing economy, heading into next year.
“There are several challenges playing out across the economy. We’re facing a probable recession sometime in the next year and rideshare insurance costs are going up,” they told staff. The co-founders said that the “tough news” would affect every organization within the company.
Still, the company said it was confident in the overall trajectory of the business and maintained its guidance regarding third-quarter revenues. Lyft said the layoffs are rather a proactive measure that is part of its planning for next year.
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The move comes after the company, which has more than 4,000 non-driver employees, already cut a few dozen staffers over the summer. That much smaller cut accounted for just about 2% of its workforce.
“We worked hard to bring down costs this summer: we slowed, then froze hiring; cut spending; and paused less-critical initiatives. Still, Lyft has to become leaner, which requires us to part with incredible team members,” Zimmer and Green said.
This year, Lyft has taken a hit amid surging inflation and a challenging economic landscape. The company’s stock was off slightly on Thursday following the news but is down a whopping 71% over the past year. That is nearly double the percentage of market value that Lyft’s biggest competitor Uber has shed during that same period.
The job cuts come as a recession appears ever more likely. In order to combat blistering inflation, the Federal Reserve has been hiking interest rates on a historic scale. On Wednesday, the central bank conducted another 75 basis point hike, the fourth consecutive increase of such a massive scale.
The action is designed to drive down inflation by dampening demand, although the side effect is that it causes the economy to slow and can ultimately result in layoffs. While the job market is still strong, most economists expect unemployment to begin ticking, and many predict the economy will crater into a recession sometime next year.
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Also Thursday, payments company Stripe announced that it is laying off more than 1,000 employees, or about 14% of its labor force. Co-founders Patrick and John Collison said in an email to staff that the company is preparing for “leaner times” ahead.
“We were much too optimistic about the internet economy’s near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown,” they said in the missive.
