Illustrated by Shoshana Gordon/Axios
The growing wave of tech layoffs this week has felt like a shocking and sharp turn in an industry that was on top of the world just a year ago.
Be smart: Technology has not escaped the impact of the economy as a whole, and Silicon Valley has always been in a rhythm of booms and busts. However, the recent boom lasted so long that many forgot that it had to end someday.
News promotion: Amazon announced Wednesday that it will cut a total of 18,000 jobs, including some job cuts announced last year and new cuts, particularly to its retail and human resources teams.
Big picture: A technology’s reputation for driving economic growth has always been based on its ability to deliver productivity gains.
- The industry has also grown by capturing market share from many consumer and business segments that have moved from analog to digital.
- The financial crisis of 2008-2009 ushered in an era of easy money where zero interest rates pushed massive amounts of capital into technology.
- The arrival of the pandemic has brought some sectors to a standstill, but tech companies that have seen a surge in demand have stepped up.
“It’s been a party for over a decade.” Margaret O’Mara, a professor of technology industry history at the University of Washington, said: “It’s amazing how long this boom has lasted.”
According to O’Mara, there has been speculation that pandemic-related behavioral changes will continue, including a shift to remote work and online grocery shopping.
It has led many engineers enterprise to stay employed during the pandemic. For example, the parent companies of Facebook and Google grew by more than 20% last year, while other big tech companies have doubled since pre-pandemic.
then inflation, The Federal Reserve has raised interest rates and the economy has softened dramatically — just as many people have returned to the pre-pandemic ways of working and shopping. Despite the rate, there was no escape from this kind of change.
- Online advertising has been particularly hard hit, with Google, Meta, Microsoft and others all noting a noticeable slowdown from mid-2022 onwards. Many tech companies started by slowing or freezing hiring, but quickly moved to layoffs when the broader recession became apparent.
chip department, That product was in short supply, but now the oversupply needs to be addressed.
What they say: “The next two years will probably be the toughest,” Microsoft CEO Satya Nadella said this week.
Yes, but: This is not a dotcom bankruptcy, especially for a large company. Despite significant job cuts, large tech companies are still vital to the economy and still make a lot of money.
- The layoff numbers suggest contraction, not collapse. There are also outliers — Elon Musk’s indebted Twitter has cut roughly two-thirds of his 7,000-plus employees — but the most common cuts are in the 10% range. was.
- “They’re kind of right sized,” O’Mara said. “In some ways, the pandemic may have delayed the coming reset.”
what’s next: Firms that haven’t cut jobs are laying off workers to turn a profit and please investors, to keep their cost structures competitive with competitors, or to adjust to falling demand. Job cuts may continue as we feel we need to cut back. reduce at the same time.