Shortly before Thanksgiving, Amazon CEO Andy Jassy confirmed rumors that several divisions of the e-commerce giant had begun layoffs and said the company would be reviewing staffing needs for the new year.
On Wednesday, Jassy provided a sober update on that review. Amazon is cutting her more than 18,000 jobs, nearly double her previously reported 10,000 and recording the highest absolute number of layoffs by any tech company in the recent recession. doing.
Amazon and other tech companies implemented hiring freezes, layoffs and other cost-cutting measures at many of Silicon Valley’s most prominent companies in the second half of last year. But if 2022 was the year that the good times ended for these tech companies, 2023 is already shaping up to be the year people at these companies wake up to how bad things can get. I have.
The same day Amazon announced layoffs, cloud computing company Salesforce said it would cut about 10% of its workforce. This figure easily equates to thousands of employees. His Vimeo, a video-sharing outlet, has announced he will cut 11% of his workforce. The next day, digital fashion platform Stitch Fix announced plans to cut salaried workers by 20%, following last year’s 15% cut.
As tech companies grapple with a seemingly perfect storm of factors, they are having a lasting impact on the industry. After the surge in demand for digital services during the pandemic, many companies have aggressively started hiring. Demand then surged as Covid-19 restrictions were lifted and people returned to living offline. Rising interest rates have also dried up the easy money technology companies depended on to make big bets on future innovation, slashing very high valuations.
As recession fears and economic uncertainty continue to weigh on consumers and policy makers as we head into 2023, interest rate hikes are expected to continue. Additionally, increased layoffs may allow some tech companies to take tougher measures to cut costs than they otherwise would.
While there have been job cuts in the consumer goods sector recently, and there are signs of more job cuts elsewhere, the situation in Silicon Valley stands in stark contrast to the economy as a whole.
The Labor Department’s latest jobs report on Friday points to a year of staggering job growth in 2022, making it the second-best year for the labor market on record going back to 1939.found Tech layoffs increased 649% year-over-year in 2022, while job cuts across the economy increased only 13% over the same period.
In a memo to employees this month, Jassy pointed to the need for significant cost savings at Amazon as “an uncertain economy and rapid hiring over the last few years.” Others across the industry have repeated these points with varying degrees of atonement.
In a series of apologies that are starting to sound alike, Silicon Valley business leaders, from Meta’s Mark Zuckerberg to Salesforce’s Marc Benioff, have called for a wave of job cuts to replace pandemic-fueled tech products. They blame their own misunderstandings about how demand will unfold.
Benioff started his memo to Salesforce employees last week by citing the Hawaiian word for family, as he often does. “As an Ohana, he has never been more mission critical to our customers.” But the economic environment was “challenging,” Benioff writes. “With this in mind, we have made the very difficult decision to reduce our workforce by approximately 10%, primarily in the coming weeks.”
‘The pandemic has increased our revenues, and we’ve hired too many people, leading to the recession we’re facing now, and I’m responsible for that,’ Benioff said. However, like other Tech leaders, it’s unclear if Benioff will affect his title or compensation.
Patricia Campos Medina, executive director of the Labor Institute at Cornell University’s Department of Industrial and Labor Relations, denounced the mass charges as an “empty apology” to workers who are now paying for their miscalculations. bottom.
Campos Medina added that there will be a lot of uncertainty for these technical workers in the short term, “taking a huge economic hit on their livelihoods.” Please resume economic activity. ‘ She predicts that many of the laid-off tech workers are likely to be able to find work and ‘will be more stable in the medium to long term.’
But the end may not be in sight yet. Dan Ives, Analyst, Wedbush Securities Said Last week, we said layoffs at Salesforce and Amazon “further strengthen trends we expect to continue in 2023 as the tech sector adapts to a softening demand environment.” The industry is now forced to cut costs because “he spent money like a rock star in the 1980s to keep up with demand,” he added.
There is also growing concern that technology layoffs will spread elsewhere, despite the strength of the overall labor market.
“I think we’re seeing an inflection point. Job growth is slowing and many of these tech layoffs we’re hearing are expected to hit the economy by the end of the first quarter.” I think it’s starting to take shape across the board,” said John Lear, chief economist at Morning Consult. In an interview Friday he spoke with CNN’s Chief Business Correspondent Christine Lomans.
In that sense, at least Silicon Valley may be ahead of its time again, but not in the form it wants.