Musk spooks markets with his ‘super bad feeling’ about the economy

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Shares in the electric carmaker Tesla fell more than 8 per cent on Friday following news that CEO Elon Musk plans to freeze hiring and slash jobs at the company.

Reuters reported on Thursday after seeing an e-mail Musk sent to Tesla executives that he had a “super bad feeling” about the economy and planned to cut about 10 per cent of the company’s jobs.

Musk’s message was titled “pause all hiring worldwide,” came two days after the billionaire told staff to return to the workplace or leave, and adds to a growing chorus of warnings from business leaders about the risks of recession.

Almost 100,000 people were employed at Tesla and its subsidiaries at the end of 2021, its annual regulatory filing showed. The company was not immediately available for comment.

Musk has warned in recent weeks about the risks of recession, but his email ordering a hiring freeze and staff cuts was the most direct and high-profile message of its kind from the head of an automaker.

Like other carmakers, Tesla has been dealing with supply chain problems fuelled by the COVID-19 pandemic and Russia’s invasion of Ukraine. Strict lockdowns in Shanghai, where its factory in China is located, have also affected its production.

Musk’s gloomy outlook echoes recent comments from executives including JPMorgan Chase & Co CEO Jamie Dimon and Goldman Sachs President John Waldron.

A “hurricane is right out there down the road coming our way,” Dimon said this week.

Inflation in the United States is hovering at 40-year highs and has caused a jump in the cost of living for Americans, while the Federal Reserve faces the difficult task of dampening demand enough to curb inflation while not causing a recession.

Musk, the world’s richest man according to Forbes, did not elaborate on the reasons for his “super bad feeling” about the economic outlook in the brief email seen by Reuters.

It was also not immediately clear what implication, if any, Musk’s view would have for his $44 billion (€41 billion) bid for Twitter, which US antitrust regulators cleared on Friday.

‘Pause all hiring’

Before Musk’s warning, Tesla had about 5,000 job postings on LinkedIn, from sales in Tokyo and engineers at its new Berlin gigafactory to deep learning scientists in Palo Alto. 

It had scheduled an online hiring event for Shanghai on June 9 on its WeChat channel.

In a Tuesday email, Musk had said Tesla employees were required to be in the office for a minimum of 40 hours per week, closing the door on any remote work. 

“If you don’t show up, we will assume you have resigned,” he said.

Musk has referred to the risk of a recession repeatedly in recent comments. 

Remotely addressing a conference in mid-May in Miami Beach, he said: “I think we are probably in a recession and that recession will get worse”.

Other companies have cut jobs or are slowing or pausing hiring amid weakening demand. 

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This week, two major cryptocurrency exchange platforms, Gemini and Coinbase, announced a freeze in hiring after the dramatic collapse of a so-called stablecoin rocked the entire crypto industry.

Last month, Netflix said it had laid off about 150 people, mostly in the United States, and Peloton said in February it would cut 2,800 jobs. 

Meta Platforms, Uber and other technology companies have also slowed hiring.

In June 2018, Musk said Tesla would cut 9 per cent of its workforce as the then-loss-making company struggled to ramp up output of Model 3 electric sedans, although data in its regulatory filings showed reductions were more than offset by hiring by year-end.