Silicon Valley layoffs go from bad to worse
Just before Thanksgiving, Amazon CEO Andy Jassy confirmed rumors that layoffs had begun in multiple departments at the e-commerce giant and said he would review staffing needs in the new year.
On Wednesday, Jassy provided a sharp update to that review: Amazon is cutting more than 18,000 jobs, nearly double the 10,000 previously reported and marking the largest absolute number of layoffs of any tech company in the downturn The last.
At Amazon and other tech companies, the second half of last year was marked by hiring freezes, layoffs and other cost-cutting measures at a number of big names in Silicon Valley. But if 2022 was the year the good times ended for these tech companies, 2023 is already shaping up to be a year when the people at those companies prepare for the worst.
On the same day, Amazon announced layoffs, cloud computing company Salesforce said it was rightfully laying off about 10% of its staff — a figure that easily runs into the thousands — and video-sharing outlet Vimeo said it was was cutting 11% of its workforce. The day after, digital fashion platform Stitch Fix said it planned to cut 20% of its paid staff, after cutting 15% of its paid staff last year.
The continued industry uptick comes as tech firms face a seemingly perfect storm of factors. After initially seeing a boom in demand for digital services amid the onset of the pandemic, many companies hired aggressively. Then came a crash in demand as Covid-19 restrictions were lifted and people returned to their offline lives. Rising interest rates also sapped the easy money tech companies relied on to fuel big bets on future innovations and cut their lofty valuations.
Heading into 2023, recession fears and economic uncertainties still weigh heavily on the minds of consumers and policymakers, and interest rate hikes are expected to continue. Beyond that, the growing number of layoffs may also give some tech companies some cover to take more drastic steps to cut costs now than they might have otherwise.
While there have been some recent layoffs in the consumer goods sector and hints of more to come elsewhere, the situation in Silicon Valley remains in stark contrast to the economy as a whole.
The latest Labor Department employment report on Friday pointed to a year of exceptional job growth in 2022, marking the second-best year for the labor market on record going back to 1939. Meanwhile, A separate report from recruitment firm Challenger, Gray & Christmas found that layoffs in tech increased 649% in 2022 compared to a year earlier, compared to just a 13% increase in job cuts in the economy. general during the same period.
In his note to employees this month, Jassy emphasized the need for significant cost reductions at Amazon for “the uncertain economy and that we’ve been hiring rapidly over the last several years.” Others across the industry have echoed those points, with varying degrees of redemption.
In a series of apologies that are beginning to sound alike, Silicon Valley business leaders, from Meta’s Mark Zuckerberg to Salesforce’s Marc Benioff, have blamed the wave of job cuts on their misreading of how demand would play out. driven by the pandemic for technology products.
Benioff began a memo to Salesforce employees last week by invoking, as he often does, the Hawaiian word for family. “As an Ohana,” he wrote, “we have never been more critical of our customers.” But the economic environment was “challenging,” Benioff wrote. “With that in mind, we have made the very difficult decision to reduce our workforce by about 10 percent, mostly over the next few weeks.”
“While our revenue accelerated during the pandemic, we hired a lot of people that led to this economic downturn that we’re facing now, and I take responsibility for that,” Benioff continued. Like other tech leaders, however, it’s unclear whether Benioff will face any consequences for his title or compensation.
Patricia Campos-Medina, executive director of the Labor Institute at Cornell University’s School of Industrial and Labor Relations, criticized the wave of mea culpas as “empty apologies” to workers who now pay for their miscalculations.
While there will be a lot of short-term uncertainty for these tech workers, as well as “a big economic hit in their lives,” Campos-Medina added, “I think this is a very skilled workforce that will find a way to re-engage in the economy.” She predicts that many of the laid-off tech workers will likely be able to find work, and “we will see more stability in the medium to long term.”
But the end may not yet be in sight. Dan Ives, an analyst at Wedbush Securities, said last week that the layoffs at Salesforce and Amazon “add to the trend we expect to continue into 2023 as the technology sector adjusts to a softer demand environment.” The industry is now being forced to cut costs after “spending money like 1980s Rock Stars to keep up with demand,” he added.
And despite a strong overall labor market, there are growing concerns that tech layoffs could spread elsewhere.
“I think we’re seeing an inflection point; The pace of job growth is slowing, and a lot of these tech layoffs that we’re hearing about, I think will start to materialize throughout the broader economy by the end of the first quarter,” said John Leer, chief economist at Morning Consult CNN chief business correspondent Christine Romans in an interview Friday.
In that sense, at least, Silicon Valley may be ahead of the curve again, but not in the way it wants.