Big tech companies have laid off 20,000 workers in the past week, accelerating the job cuts and hiring freezes that have plagued Silicon Valley for months.
Twitter, Meta (the parent of Facebook), Stripe, Salesforce, Lyft, and a growing list of smaller companies have laid off a significant number of employees. Thousands of computer engineers, salespeople and support staff are out of work in one of the highest paying industries in the country.
Meanwhile, other companies, such as Google and Amazon, have recently implemented hiring freezes and slowdowns. The exits are solidifying the feeling in Silicon Valley that the previous decade's bull market is officially over. It creates a picture of what the rest of the US economy could face if an expected recession hits. The executives of the big tech companies that made the cuts attributed the layoffs to several interconnected factors. They include overzealous hiring, a slowdown in ecommerce, and people spending less time online. For months, tech CEOs have been warning of an impending recession, warning their employees to expect tougher working conditions and a significant slowdown from the rapid growth they've been preaching for years.
Low interest rates over the past decade have made it easier for venture capitalists to find money to invest in startups, even if the startups didn't have solid plans to make any money. Inflation hits big tech
That dynamic has accelerated during the pandemic. At the same time, the biggest tech companies have expanded rapidly to capitalize on the fact that people are spending more time online. Technology stock prices have risen, boosting trust and share-based compensation for employees.
However, as the Federal Reserve aggressively raises interest rates to fight Biden's inflation, venture capitalists are becoming more selective in their investments, forcing companies to prioritize profitability over growth. The titans of Big Tech are doing the same, as higher prices squeeze revenue and force them to cut back.
Mass layoffs come just a year after Silicon Valley's peak, with company valuations in the trillions. Big tech salaries were at an all-time high and cryptocurrency was pouring new wealth into the pockets of investors and workers.
Now tens of thousands of former Big Tech workers are currently looking for work. Lyft, Twitter, Facebook, Amazon, and Google did not respond to Washington Post requests for comment. Stripe's spokesperson referred to a blog post written by the company's CEO about the layoffs. Apple, Amazon, Google, and Microsoft have all crossed the trillion-dollar mark, making them the most valuable companies in modern history. They've competed for business and tech talent with venture capital-backed startups like Uber, WeWork, Airbnb, and Stripe, raising wages and cost of living in the Bay Area and other tech hubs like Seattle.
Amazon and Google in battle
However, over the past year, cracks have begun to appear in that domain. Big Tech CEOs have begun to warn of layoffs, and companies like Google, Microsoft, and Facebook have quietly cut back on hiring. As economic sentiment fluctuated between positive and negative over the summer, companies have sent mixed signals. The past few weeks have raised concerns, as a series of earnings reports revealed that even the strongest companies, such as Amazon and Google, are struggling to maintain the revenue growth they have shown in recent years.
When Facebook and Amazon posted quarterly earnings in the last week of October, their stock prices fell more than 20%. Amazon's predictions for the crucial holiday season disappointed analysts' expectations, and Facebook investors began fleeing in droves after CEO Mark Zuckerberg said the company would continue to lose money as it shifted its focus to build a business. new virtual world of "metaverse".
Microsoft and Google, the third and fourth most valuable company in the world after Apple and Saudi Aramco, have reported slowdowns in revenue growth, indicating that demand for digital advertising and cloud software is decreasing. Mass layoffs on Twitter
Twitter's new owner, Elon Musk, laid off about half of the company's 7,500 employees last week. Musk said Thursday that the company would need new sources of income to "survive the next economic downturn."
His comments came a day after Zuckerberg said the "macroeconomic downturn" was one of the reasons he needed to lay off 11,000 employees, or 13 percent of Meta's workforce, over 18 years. company history. Stripe is laying off 14% of its workforce, housing market Zillow 5%, and Ride
FYI, says a layoff tracker run by tech entrepreneur Roger Lee, tech workers could expect dozens of job offers for their skills. Now, they have to compete for jobs with thousands of other people.
In October, inflation was lower than expected, fueling hopes that the Fed's interest rate hikes are working as expected and may not need to be increased further.
According to a Nov. 6 Note to clients, Goldman Sachs economists predict that U.S. wages will continue to rise in 2023, even though house prices may decline. According to a Nov. In an October 9 research note from Barclays, economists predict a "shallow recession" next year.
Domino or avalanche effect
However, the layoffs in Silicon Valley will have a growing impact, according to Julia Pollak, chief economist at Ziprecruiter, a job search site. Other technology services, such as cloud computing or communication platforms, as well as digital advertising, cost technology companies a lot.
The cuts will most likely continue.
"We're almost certain to see more," Pollack predicted.
According to the US Department of Commerce, the technology industry will account for about 10.2% of US GDP by 2020. The seemingly limitless growth of companies like Amazon, Google, Microsoft, Facebook, Netflix, Tesla and Salesforce, among others, it has strengthened the retirement accounts of millions of Americans as tech companies have captured a growing share of the stock market. In March, technology companies accounted for almost 30% of the total value of the S&P 500.
During the pandemic, tech companies expanded faster as people spent more time online, bought more computers and video game consoles, and shifted much of their shopping from brick-and-mortar stores to e-commerce. Tech companies have capitalized on the change, investing billions of dollars in hiring new employees and building new data centers to take advantage of what was considered a once-in-a-lifetime opportunity.
However, as pandemic restrictions have been lifted and most people have reverted to their pre-pandemic ways, the gamble that that behavior would be permanently altered has backfired. Change in e-commerce purchase
CEOs of Facebook and Shopify, which provide online tools for selling to merchants, have accused their layoffs of overstating the change in ecommerce. "It didn't go as I expected or none of us expected," Zuckerberg said during a conference call with employees Wednesday, according to a recording obtained by the Washington Post. This week's layoffs have significantly reduced the workforce in Silicon Valley, but most large companies still have more employees than in 2019.
Great break from technical work
However, Buyer, who was a technology analyst during the dotcom crash and has more recently advised companies on structuring their initial public offerings, said the rapid turnaround of a trend that had led to so many hiring and investments was having a great emotional impact. , as people confront reality with the inflated expectations they had built.
For years, skilled tech workers have moved from one company to another, using one job to earn a higher salary in another. Big tech companies regularly offered entry-level engineers $ 200,000 per year plus a signing bonus.
Big tech companies have provided perks like free meals, massages, dog sitting, and on-site laundry, plus unlimited vacation days. With so many recently laid off workers on the market, things are now going to change.
\It predicts that many workers will have to undergo wage cuts or fill roles below their level of experience to find a new job in this environment.
"I can't be too demanding," she explained. Wages will fall and people will take jobs they may not have considered before. . For years, he said, startups have struggled to compete for engineers with the biggest tech companies, and the old-school ethos of working for a low starting salary in the eroded. . "It seems to be very unpleasant