CNN
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Shortly before Thanksgiving, Amazon CEO Andy Jassy confirmed rumors that layoffs had begun in several departments at the e-commerce giant and said he would review staffing needs in the new year. .
On Wednesday, Jassi provided a sobering update on this review: Amazon cuts more than 18,000 jobs, nearly double the 10,000 previously reported, and marks the highest absolute number of layoffs of any tech company during the recent recession.
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 when the good times are over For these tech companies, 2023 is already shaping up to be a year where people at these companies are preparing for the worst things.
On the same day, Amazon announced layoffs, a cloud computing company Salesforce said it was deleted About 10% of its staff – a figure that easily equates to thousands of workers – and video-sharing site Vimeo said it was cutting 11% of its workforce. The next day digital fashion platform Stitch Fix said it plans to cut 20% of its salaried workforceafter cutting 15% of its salaried workforce Last year.
The continued fallout in the industry comes as tech companies grapple with a seemingly perfect storm of factors. After initially seeing a boom in demand for digital services at the start of the pandemic, many companies have been aggressively hiring. Then came a boost in demand as Covid-19 restrictions rolled back and people returned to their offline lives. Rising interest rates have also dried up the easy money tech companies relied on to fuel big bets on future innovations and squeezed their exorbitant values.
Towards 2023, fears of recession and economic uncertainties continue to weigh heavily on the minds of consumers and policy makers, 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 tougher action to cut costs now than they otherwise might have.
Although there have been some recent layoffs in the consumer goods sector and clues of more to come elsewherethe situation in Silicon Valley remains in stark contrast to the economy as a whole.
On Friday, the Labor Department’s latest jobs report reported a year of extraordinary job growth in 2022marking the second-best year for the job market in records dating back to 1939. Meanwhile, a separate report from outplacement firm Challenger, Gray & Christmas found Tech layoffs are up 649% in 2022 from a year earlier, compared to just a 13% rise in economy-wide job cuts over the same period.
In his memo to employees this month, Jassy attributed the need for significant cost cutting at Amazon to “the uncertain economy and that we’ve been hiring quickly over the past few years.” Others in the industry have echoed these points, with varying degrees of atonement.
In a series of excuses which are starting to sound the same, Silicon Valley business leaders from Meta’s Mark Zuckerberg to Salesforce’s Marc Benioff have blamed the wave of job cuts on their own misinterpretation of how demand of technological products fueled by the pandemic would unfold.
Benioff began a memo to Salesforce employees last week by invoking, as he so 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 this in mind, we have made the very difficult decision to reduce our workforce by approximately 10%, primarily over the next few weeks.”
“As our revenues have accelerated during the pandemic, we have hired too many people leading to this economic downturn that we are currently facing, and I take responsibility for that,” Benioff continued. Like other tech leaders, however, it’s unclear whether Benioff will face any repercussions to his title or his compensation.
Patricia Campos-Medina, executive director of the Workers’ Institute at Cornell University’s School of Industrial and Labor Relations, called the series of mea culpas an “empty apology” to workers who are now paying for their mistakes. Calculation.
While there’s a lot of short-term uncertainty for these tech workers, as well as “a big economic hit to their lives,” Campos-Medina added, “I think this is a highly skilled workforce that will find a way to re-engage in the economy.She predicts that many laid-off tech workers will likely be able to find jobs and “we will see more stability in the medium to long term.”
But the end may not yet be in sight. Dan Ives, analyst at Wedbush Securities said Layoffs from Salesforce and Amazon last week “add to the trend we expect to continue in 2023 as the tech sector adjusts to a weaker demand environment.” The industry is now being forced to cut costs after “spending money like the Rock Stars of the 1980s to keep up with demand”, he added.
And despite the robust global labor market, there are growing fears that tech layoffs could spread elsewhere.
“I think we are witnessing an inflection point; the job growth rate is slowing and a lot of these tech layoffs that we’re hearing about, I think, will start to materialize across the economy by the end of the first quarter,” John Leer said. , chief economist at Morning Consult. CNN’s 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.
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