This is not that outlandish of a story to me. In economic downturns new college hires are usually the first ones let go. I have seen whole cohorts of a hiring class be let go or offers rescinded. As a leadership team if you believe the market is slowing down you often times get to make the hard decision to slow or reduce headcount.

Did she have a signed contract or not?

She said she had a signed offer letter which sounds right for how things worked when I came out of college.

In the US, employment contracts are fairly rare. It's unlikely that one was even on the table.