March 11, 2024

Struggling cosmetics company Estée Lauder’s stock is down more than half from its 2021 peak, yet it recently added $10 billion to its market capitalization. How did that happen?

Well, the company posted solid earnings, beating analyst estimates. That helps. But it also laid off 3,150 workers, told shareholders business was slow in Asia, and lowered earnings guidance.

On the surface, that doesn’t make a lot of sense or sound like a recipe for 15.0% gains in a single day. But it speaks to a current trend of companies getting lean and mean.

Multiple companies received kudos from Wall Street for cutting workforces in 2024. Google announced fresh job cuts in January, with over 1,000 employees laid off. From that announcement until its recent new high, Google saw a 7.6% increase in its share price.

In January, Microsoft announced it would cut 10,000 jobs by March, or about 5.0% of its workforce. Its stock surged 4.4%.

Amazon’s been laying off employees for years. It shed more than 27,000 jobs since 2022. The company’s recent blowout earnings, with year-over-year net income surging from $278 million to $10.6 billion, shows why investors like job losses.

Given all these layoffs, how can unemployment remain so low (3.7%), and job gains be so high (350,000 in January)? Just zoom out to see the answer.

The “Magnificent 7” stocks may dominate the stock market, but our overall economy is much more than just those seven companies. This isn’t meant to diminish their standing. Rather, it’s important to point out that those thousands of layoffs are a drop in the bucket considering the entire workforce is comprised of roughly 161 million workers.

Still, the trend is clear. Companies are finding ways to get lean.