By Bryan Jung
Job cuts in the tech sector have accelerated close to levels last seen in the first months of the pandemic, as the industry prepares for a downturn in the months ahead.
Big tech companies like Meta, Google, Amazon, Twitter, and Apple have all announced a massive number of layoffs and hiring freezes, according to a story reported by Bloomberg.
A slowdown in consumer spending, falling stock values, rising inflation, and a strong dollar causing a decline in exports have forced Silicon Valley firms to reduce their expenditures in recent weeks to save on costs.
Once a leading force in the world economy, tech companies are now facing a tighter situation, after benefiting from a major boom over the past decade.
The latest bear cycle has forced tech CEOs to be increasingly judicious on how much they are willing to spend to grow their companies, unlike in years previously to mollify their investors.
Key investors are demanding that the companies reduce operational expenses and halt unproductive projects, as they anticipate a looming recession.
Alphabet, Amazon, Meta, Microsoft, and others big tech companies have all reported shortfalls in their projections recorded in their quarterly earnings reports this year.
“We are beginning to see more job cut activity in the fourth quarter, historically when the bulk of cuts occur, as companies finalize budgets and plans,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas, a job consulting agency,
“Many companies are anticipating a downturn, and with a still-tight labor market and the Federal Reserve’s rate hikes, more cuts will be on the way as we enter 2023.”
Panicked Tech Shareholders Demand Tech CEOs Cutbacks on Staff and Expenditures
Shares of big tech companies on the NASDAQ 100 have plunged and, in some cases, lost billions of dollars in their market valuations in the face of inflation and rising interest rates.
Worried shareholders facing another round of tech stock losses after an earlier plunge this year have been demanding more action from tech CEOs in recent weeks.
In response, Silicon Valley firms have announced major layoffs, new restructuring plans, and hiring freezes.
Lyft, Stripe, and Opendoor, for example, announced last week the layoffs of at least 13 percent of their workforces, according to Bloomberg.
That comes after Apple, Google, Meta, and Microsoft said that they would freeze hiring or reevaluate staffing needs as tech sector growth slows down.
Meta, which owns Facebook and Instagram, will be terminating thousands of workers this week after the failed launch of the Metaverse, The Wall Street Journal reported.
Bloomberg reported that Meta has lost more than 71 percent of its value so far this year, with investors becoming increasingly upset at CEO Mark Zuckerberg’s Metaverse fiasco.
On Nov. 4, Elon Musk’s announced his decision to fire half of Twitter’s workforce of 7,500 after he acquired the social media giant.
“Technology companies cut the most jobs last month with 9,587, for a total of 28,207 so far this year. This is up 162 percent from the 10,781 cuts announced during the same period last year,” reported Challenger.
This is the highest monthly total of tech sector layoffs for Challenger since November 2020, which records the announcement or confirmation of job losses reported by companies across multiple industries.
Despite the major layoffs during the pandemic, tech companies had actually benefited from it, owing to strong demand from services for employees working remotely at home.
Demand for products for remote work, food delivery, and social communications platforms led to significant growth during the lockdowns, but now the economic situation has changed.
Future Job Projections for Big Tech
Almost 104,000 tech jobs have been slashed so far in 2022, surpassing the roughly 81,000 losses in 2020, according to Layoffs.fyi, a tech industry jobs tracker, which uses different sets of data from Challenger.
This year may be an even worse year regarding job losses in the tech sector compared to the year of the pandemic, said Roger Lee of Layoffs.fyi.
The proportion of layoffs in 2022 is, historically, far from the massive cuts made at the end of, for example, the dot-com bubble of the late 1990s. The tech industry shed 168,395 jobs in 2001, followed by another 131,294 the following year, according to Challenger.
Many of the start-up firms that survived the burst of the dot-com bubble have grown into massive corporations with hundreds of thousands of employees.
According to Bloomberg, a contraction in the tech sector this time around would more likely be the case of large firms going through a phase of cost cutting restructuring rather than small start-ups going bust.
Despite the layoffs and shaky third-quarter corporate earnings reports in the tech sector, some economists still believe that the numbers reflect a strong overall economy for now.
However, they admit that other companies are not immune to the same issues that big tech is facing, as global demand from businesses and consumers is slowing worldwide.