The Wave of Layoffs continues to ‘Sweep’ Tech Companies

It doesn’t seem as though the tsunami of layoffs that hit dozens of big US corporations in late 2022 will ease down in 2023. The “giant” Amazon declared that it will fire 18,000 people altogether due to “economic challenges”. Amazon isn’t the only tech giant to make layoffs in the new year, though. In light of the continued economic crisis and stagnant revenues, Salesforce and Vimeo also announced the termination of thousands of staff. Similar large cuts were made to Twitter and Meta in the latter part of last year. The Wall Street Journal reports that the IT industry is experiencing the majority of the current job cutbacks because it expanded too swiftly during the pandemic epidemic. According to data from Layoffs. Fyi, IT businesses alone lost more than 150,000 employees in 2022, up from 15,000 in 2021 by a factor of 10. Tech companies continue to layoff employees.

Amazon: 18,000 employees

Andy Jassy, CEO of Amazon, stated intentions to eliminate 10,000 positions in November 2022. This is thought to be the largest layoff in the company’s history. CEO Andy Jassy revealed the corporation would eliminate 18,000 more workers than first planned in a memo to staff members. The New York Times stated that by the end of 2022, Amazon aims to eliminate 10,000 positions, or around 3% of the company’s staff. “Given the challenging economic environment, the company’s value this year is not favourable,” he declared. Tech companies continue to layoff employees. In addition, we have hired too many people recently. The Amazon Store, Human Experience, and Technology Solutions are among the affected companies.

Salesforce: 10% of employees, equivalent to about 7,000 people

According to Salesforce, significant job losses will be made by the firm in 2023. The cloud-based software business Salesforce, whose co-CEO Marc Benioff made the announcement on January 4, expects to fire 7,000 people, or 10% of its staff. … a cost-cutting and reorganisation strategy that included eliminating a number of offices. “The market is still difficult, and consumers are holding off on purchases more frequently. Tech companies continue to layoff employees. Keeping this in mind, we have made the extremely painful choice to cut 10% of the workforce over the upcoming weeks, Benioff said in an email to staff members. “I take responsibility for the economic hardship the firm is experiencing since we employed too many workers because the company’s sales increased quickly during the pandemic,” he continued.

Vimeo: 11% of personnel

Anjali Sud, the CEO of the free video-sharing website Vimeo. Anjali Sud, the CEO of Vimeo, revealed on January 4 that 11% of the company’s staff will be let go. The video platform has made its second-largest layoffs in less than a year, following a 6% personnel reduction in July 2022. In an email to staff members, Sud stated, “This was a very tough choice that truly impacts everyone of us.” Making Vimeo a more focused and effective business that runs with the discipline it requires in a challenging environment is also the right thing to do. According to a Vimeo official, the adjustments are meant to allay current financial worries and strengthen the company’s balance sheet. Tech companies continue to layoff employees.

Source: Pexels.com

The Bureau of Labor Statistics said on Friday that despite a tight labour market, American businesses added more jobs than anticipated in April 2022. However, the pandemic-fueled boom in the tech industry is beginning to slow down. Tech companies continue to layoff employees. According to an internal document it received, Facebook’s parent company Meta is halting hiring and scaling down some employment ambitions, Insider revealed last week. According to the expenditure estimates presented for this reporting period, “we periodically examine our talent pipeline in accordance with our business needs and are reducing its growth accordingly,” a representative told CNBC.

At the company’s earnings call, Amazon’s chief financial officer informed analysts that the company’s warehouses are “overstocked” as a result of a massive hiring frenzy during widespread lockdowns that caused customers to purchase more frequently online. Not just the biggest IT firms are affected. The CEO of Uber said in a memo to employees published by CNBC that the business “will approach hiring as a luxury and carefully assess when and where we acquire personnel,” adding, “We will be more tougher on expenses overall.” Tech companies continue to layoff employees. Following a massive recruiting spree, retail broker Robinhood recently said it was laying off around 9% of its full-time staff to reduce duplicate job duties.

In an effort to decrease costs, Peloton stated earlier this year that it will downsize its employment by around 20%. Startups like the celebrity video app Cameo have also just announced a round of layoffs that would affect around 25% of their personnel, as originally reported by The Information. The cuts stand in sharp contrast to the rest of the economy, where companies are battling rising labour costs through inflation and a wave of layoffs and jobseekers still have a lot of negotiating leverage. Tech companies continue to layoff employees. With 78,000 new jobs added in April, the leisure and hospitality sector grew at the fastest rate, indicating a rebound in pre-pandemic activity demand.

According to analysts, the issues affecting the IT sector are distinct in a field that has expanded quickly throughout the epidemic and may not necessarily portend a general downturn. Tech companies continue to layoff employees. Many economists anticipate the tight labour market to last for a bit longer because of the aging US population and other causes, even if part of the pressure may also originate from macroeconomic developments that may subsequently play out in other industries.

Inflation and other macro factors

The fact that the tech companies employ so many radically dissimilar business models, from Facebook advertising to Amazon’s fulfillment centers, makes it challenging to follow trends in employment data. There do not appear to be any leading industry trends for total job growth, according to Veneta Dimitrova, senior US economist at Ned Davis Research, who examined industry data from the Bureau of Labor Statistics. Nevertheless, just as it has an impact on other economic sectors, inflation can harm employing technology businesses. Tech companies continue to layoff employees.

A benchmark, according to Terry Kramer, an associate professor at the UCLA School of Management, is a business like Amazon. People just aren’t buying as much, according to Kramer, who noted that inflation is above 8% and that the pace of economic development is already beginning to decelerate. “And that, in my opinion, is more the Amazon scenario, where customers are more selective when making purchases through their primary e-commerce site. The amount of money available to customers is lower after accounting for inflation.”

Inflation indicates rising prices for an organisation like Amazon. Agron Nicaj, associate economist at The Conference Board, warned that if consumer demand for your goods and services doesn’t increase significantly, it can reduce your profit margins. “As a result, they are compelled to limit their expansion.” However, slowdowns at other enterprises could be more unique to their industries. Tech companies continue to layoff employees. For instance, Kramer claimed that Apple’s iPhone privacy modifications had a negative impact on Meta’s capacity to target advertising, which contributed to the hiring freeze at Meta.

Post-pandemic snapback

One of the industries that has benefited the most from behavioural shifts at the pandemic’s height is technology. Investors flocked to so-called stay-at-home firms like Peloton, Zoom, and Netflix when workplaces shuttered and people stayed home more. Tech companies continue to layoff employees. Many of these businesses have had to make adjustments when employees return to the workplace, vacation, and eat out. According to University of Michigan economist Daniil Manaenkov, “the pandemic’s impact was essentially a preference shock.” He continued by saying that when preferences changed, the government intervened to support firms when demand unexpectedly met a ceiling.

The cycle is now being broken, but without assistance from the government. There is no assistance from the government now that we are experiencing the reverse shock, but it is still a severe shock, according to Manaenkov. Therefore, it might be difficult for the industry that has benefitted from the epidemic. But also for those who worked there, as they won’t be eligible for significant unemployment benefits. Tech companies continue to layoff employees. According to Manaenkov, if layoffs in the computer industry increase, it may have an effect on the economy as a whole. In the absence of government stimulus, laid-off tech employees could reduce their discretionary spending, which might cause a general market downturn.

However, Nicaj noted that several major tech firms have actually increased their recruiting throughout the nation, which may be a sign that they are also experiencing the consequences of the competitive labour market. If we look at the economy more broadly, job security for employees currently seems to be very resilient. Given how competitive the job market is right now, Nicaj asserted that this is definitely the best moment to maintain your job. Tech companies continue to layoff employees.

VC portfolio rebalancing

According to Mark Peter Davis, managing partner of New York-based investment company and incubator Interplay, the decline in recruiting for VC-backed businesses may be caused by what’s known as a “denominator effect.” Large institutional investors are the first step, and they often possess a variety of assets, including venture capital and listed equities. Tech companies continue to layoff employees. These investors would suddenly discover a considerably higher portion of their portfolio in venture capital (VC) and would need to rebalance by restricting future VC investment if the value of publicly listed equities fell dramatically.

Institutional investors can now begin taking money out of VC funds in order to rebalance their portfolios. This may have an effect on the financial environment for startups, causing businesses to cut back on their cash expenditures and, in some situations, result in layoffs. Tech companies continue to layoff employees. Sherwood Partners, a Silicon Valley company that aids firms in reorganising or liquidating, has Martin Pichinson as a co-chair. He claimed that during a temporary slump that lasted through portions of 2020 and 2021, his firm has remained largely stable. He ascribes this slowdown to the rise in loans made under the state Paycheck Protection Program, which, in essence, provided some small enterprises with a further indicator. But since then, he has witnessed the revival of the company.

He claimed that the venture capital strategy, which depends on placing massive bets with the knowledge that many would ultimately fail, is primarily responsible for his company’s stability. This is especially true today that IPOs have stagnated, making it more difficult for businesses to gain traction in the market and reward investors with a profit. Tech companies continue to layoff employees.

From hypergrowth to efficient growth

Kramer pointed out that a decline in IT employment doesn’t always indicate that the sector’s growth has slowed. People need to see how much it has expanded in the past two, three, or four years as a result of Covid, according to Kramer. “They’re still developing and have already employed a lot of people, even if they grow at 30, 40% and then drop to zero to 5% growth.” Although there is still interest in hiring from digital businesses, according to two executives of hiring platforms, the basic methodology has changed. CEO of talent acquisition platform SmartRecruiters, Jerome Ternynck, described it as a change from “growth at any cost” to “efficient growth.” 

As Ternynck said, lowering public market values in the technology sector, investors have made it obvious that now is the time for technology to continue expanding, but money is no longer available for free. “This means a slower pace of new hiring for IT businesses.” Tech companies continue to layoff employees. Josh Brenner, CEO of Hired, a tech and sales-focused jobs portal, claims that despite his experience working at tiny tech startups and his expectation of some instability, the company hasn’t slowed down yet and has even boosted investment in recruiting major tech. He stated in a statement, “From what we’ve observed, employers are focused on recruiting for the long term, having learnt from the setback in 2020. “Shutting off the employment stream is not worth it. We’re not surprised that there has been a relative slowdown on a year-to-year basis given the amount that businesses have had to recover over the previous year.” Tech companies continue to layoff employees.

The venture investor Davis continues to see a lot of potential in investing in startups since tough times “starve weak firms” without destroying strong ones. Davis stated, “I informed the LPs we spoke to that it is truly hunting season. “Now is an excellent moment to invest money. And in recent recessionary cycles, many outstanding businesses have developed.

About the Author

Ahsan Azam is the author who specializes in avionics as well as research writing. The author has a keen attention to detail and is focused on providing interesting content to the readers.

About Stone Age Technologies SIA

Stone Age Technologies SIA is a reliable IT service provider, specializing in the IT Solutions. We offer a full range of services to suit your needs and budget, including IT support, IT consultancy, remote staffing services, web and software development as well as IT outsourcing. Our team of highly trained professionals assist businesses in delivering the best in IT Solutions. Contact us for your IT needs. We are at your service 24/7.