Boom times end for US tech industry

An exterior view of Twitter’s headquarters in Piccadilly Circus, London, on Nov 5. DINENDRA HARIA/ANADOLU AGENCY

Tens of thousands of workers fired at large companies

The COVID-19 pandemic moved much of the world online and led to a boom, especially for high-tech companies in the United States over the past two years, but it couldn’t last indefinitely.

Amazon founder Jeff Bezos said in April: “Markets teach. The lessons can be painful.”

Now, the firing of tens of thousands of workers at Big Tech companies just a year after Silicon Valley was at its peak is sending a new message: The bull market of the past decade — which created massive amounts of wealth for tech investors, workers and the broader economy — is over.

The pain is being felt by investors faced with lower stock prices, and thousands of employees losing their jobs as companies deal with slowing economic growth, higher costs, rising interest rates and high inflation.

Online advertisements are the chief source of income for countless tech companies, but as the economy ran into trouble, many of them slashed these budgets.

After enjoying stunning growth in demand during the pandemic, many of technology’s biggest players are dealing with a return to more normal demand, coupled with the impact of higher interest rates and the looming threat of recession.

Investors want their stock prices to rise and are pushing companies for higher productivity, to re-examine costs, focus on cost savings, cut high wages, eliminate cushy perks, get stock prices up and improve profits.

A group poses for a photo on the Meta campus at Menlo Park, California, last month. TERRY SCHMITT/UPI PHOTO/NEWSCOM

Kenneth Fong, founder and chairman of Kenson Ventures in Silicon Valley, California, said: “It (the layoffs) is not surprising. The reason is simple: the stock market was very high in 2021. In 2022, the value of those companies dropped significantly. The motive of Silicon Valley is to make a lot of money. Because the companies did so well last year, California has more than $90 billion in surplus funds this year, but the state might face a budget deficit of $25 billion next year. It’s wholly due to the stock market. Because the stock market dropped so much, those high-tech companies had to lay people off.”

More than 35,000 tech workers at 72 US companies have been laid off this month, adding to a total of 120,000 tech jobs lost this year, according to data compiled by layoffs.fyi, which has used public records to track tech layoffs since the pandemic started.

Semil Shah, a general partner at venture capital company Haystack, told The Washington Post there may be as many as 25,000 to 50,000 unemployed tech workers in the Bay Area job market over the next few months.

However, all the Big Tech layoffs this year do not amount to 0.1 percent of the total US workforce of 164 million, according to the Labor Department.

According to the department’s latest report on jobless claims, the number of people registering as unemployed fell on a weekly basis by 4,000 in the second week of this month, to 222,000 claims.

A report by Goldman Sachs’ chief economist Jan Hatzius said “tech layoffs are not a sign of an impending recession”.

Even though tech companies reach billions of users, they only account for a small share of the entire US workforce. If all employees working in internet publishing, broadcasting and web searches were fired simultaneously, the unemployment rate would rise by less than 0.3 percent, according to Goldman Sachs.

While many tech companies have reduced their workforce, others are still hiring. The latest Jobs Report from the Computing Technology Industry Association shows that despite the layoffs, hiring by tech companies grew in October for the 23rd consecutive month, adding more than 20,000 positions.

Facebook parent MetaPlatforms fired 11,000 people this month — about 13 percent of its workforce.

CEO Mark Zuckerberg attributed the cuts to over-hiring during the pandemic. In a letter to staff members, he cited a decline in e-commerce, the wider economic downturn, increased competition, and a decline in ad sales — the primary way the company makes money.

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