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Ford, American Express illustrate both side of disruption, innovation cycle

American Express (AXP) announced plans to cut roughly 8.5% of its workforce late Thursday. The announcement came along with the company's earnings report, where it announced a $400 million severance charge in connection with those layoffs as well as charges related to restructuring its member rewards program and some reimbursements to customers who were overcharged.

The layoffs will be mostly in the company's travel division, according to CEO Kenneth Chenault. Who said the travel business “is being fundamentally reinvented as a result of the digital revolution.” That the company's customers no longer feel the need to get help making travel arrangements shouldn't come as a surprise to anyone.

The rise of online travel sites has made finding the best deal on airfare, hotels and rental cars a breeze. Our newly mobile world has even made it possible to change your travel plans from the airport without talking to a single person.

The reduction in staff will allow American Express to redeploy those resources elsewhere as it needs them, while cutting costs in the shorter term. The move seems to illustrate a broader trend though, which is that technology has started to disrupt employment trends in the service sector.

The American manufacturing sector has been hit hard by the dual impacts of automation and outsourcing. Robots who never need breaks and foreign workers with a much lower standard of living have made unskilled American labor largely a thing of the past. These layoffs at American Express, and the struggles of former retail giants like Sears (SHLD), Best Buy (BBY) and JC Penney (JCP) are all signs that the disruption caused by technology has started to impact the service sector as well.

Bobby Raines

Bobby Raines is the Managing Editor of the Market Intelligence Center. He has degrees in Mass Communications and History from Emory & Henry College. Bobby worked at a mid-sized daily newspaper before making a switch to covering the financial industry full time in the years leading up to the financial crisis. He has been a member of the Fresh Brewed Media team since 2011 and has served as a writer and analyst. You can write to him at braines@marketintelligencecenter.com or follow him on Twitter: @BRatMICenter.