Lot of business and technology websites are rumoring a big layoff at Google. Google has been quietly laying off staff and up to 10,000 jobs could be cut according to sources. Since August, hundreds of employees have been laid off.  Source: http://www.webguild.org/2008/11/google-layoffs-10000-workers-affected.php.  We definitely know that Google is controlling its spending and according to Google spokeswoman Jane Penner’s statement earlier this month that Google’s hiring has slowed, but not stopped. 
Last month, company co-founder, Sergey Brin told San Jose Mercury news that Google is planning to reduce company contractors. Source: http://www.mercurynews.com/business/ci_10737546?source=rss.

We think that as Google has large number of contract employees, the company must be reorganizing groups and scaling back the expenses by reducing contract workforce. But we definitely think this just a rumor and there is no need for mass layoff for Google.