The great resignation turns into a forced resignation.
Thousands of layoffs in the tech sector, compounded by hiring freezes and a slowdown in hiring numbers, underscore the abrupt change in wealth in recent months on the back of rampant inflation, fears of stagflation and recession, supply chain disruptions, war in Ukraine, an ailing stock market, and others Economic factors that sound the alarm.
The final blows came on Tuesday when Coinbase Global Inc. COIN,
announced an 18% layoff of about 1,100 employees and real estate agent Redfin Corp. RDFN on,
said it would reduce staff by about 470 people, or 6% of its workforce.
READ ALSO: Redfin Cuts 470 Jobs, Stocks Drop To Record Low
“Everyone has to close the hatches. We’re in stormy, stormy seas with choppy weather on the horizon,” media titan Jeffrey Katzenberg, board member and investor in cybersecurity startup Aura, told MarketWatch.
In recent weeks, a broad cross-section of companies across all sectors have announced layoffs or plans to limit hiring amid the economic crisis. Alongside Coinbase and Redfin, Peloton Interactive Inc. PTON,
PayPal Holdings Inc. PYPL,
Tesla Inc. TSLA,
Carvana Co. CVNA,
and others said they intend to cut staff. At the same time, some of the biggest tech players – Facebook parent company Meta Platforms Inc. META,
INTC by Intel Corp.,
Client Computing Group, Microsoft Corp. MSFT,
Uber Technologies Inc. UBER,
and Lyft Inc. LYFT,
— Slow down or freeze settings.
Overall, at least 15,000 tech jobs have been or will be eliminated, according to Layoffs.fyi, a website that tracks job cuts at startups.
“ “The combined market cap of approximately 300 public technology companies with offices in San Francisco and the Valley is $9.98 trillion, its lowest since 2013, after peaking in November 2021 at nearly $15 trillion.””
Slumps in spending on PCs, tablets and advertising have only added to the tumult, and there are rumors that even cloud computing – which has spearheaded a wave of Internet expansion over the past decade – may be leveling off. All of this has contributed to a spasmodic shift from hiring frenzy to belt buckles, particularly among startups.
“It’s been a challenge in the last three years with the pandemic and two more with the secular [economic] Headwinds,” Starz chief executive Jeffrey Hirsch told MarketWatch.
The effect was most pronounced in Silicon Valley startups, local economists say. “With the uncertainty of a recession, a slowdown in near-term demand, and possible further rate hikes, there will understandably be a pause for startups and in the near term for the really big companies,” said Stephen Levy, director and senior economist of the Center for Continuing Study of the California Economy , opposite MarketWatch.
Reduced prospects and a choppy market have already delayed startups’ IPO dreams. For larger companies, the effects are more subtle. Major expansions are still underway for Google in Mountain View, Calif. and San Jose, as well as Meta in Menlo Park, Calif. and nearby Moffett Park, but it remains to be seen if they’ll fill those facilities with people as quickly as originally planned. “It may take longer, maybe 12 months, for things to bounce back for big tech,” Levy said.
Representatives from the biggest tech companies are mostly silent about their hiring plans, though Amazon.com Inc. AMZN,
said it is aggressively adding staff. “With tens of thousands of corporate and technology positions currently available, we continue to seek talented individuals to help us build the future of retail, robotics, healthcare, appliances, cloud computing and more,” said Amazon spokeswoman Kelly Nantel to MarketWatch.
For now, Big Tech is hitting the market valuation. The combined market cap of about 300 public technology companies with offices in San Francisco and the Valley is $9.98 trillion, its lowest since 2013, after peaking in November 2021 at nearly $15 trillion, Rachel says Massaro, vice president for research at the Silicon Valley Institute for Regional Studies.
“There’s certainly a confluence of things that make everyday life difficult,” Massaro told MarketWatch. “It’s a huge impact that trickles down to the business, management and hiring level.” [The unemployment rate in Santa Clara and San Mateo counties, in the heart of the valley, is at a 22-year low of 2.05%, though that could change if layoffs pick up and hiring clamps down.]
Like almost everyone else, cybersecurity startup Aura is closely monitoring costs and has been preparing “for years” for a challenging macro climate between inflation, war, supply chain problems and a post-COVID climate, Aura CEO Hari Ravichandran told MarketWatch. “It’s affecting the whole business ecosystem,” he said.
Added to this is the economic uncertainty: According to a new forecast by International Data Corp. heading for its worst decline in several years. Global shipments of traditional PCs will fall 8% year-on-year to 321.2 million units in 2022 — the sharpest drop since 10% in 2015. Meanwhile, global tablet shipments forecasts have been cut to 158 million, a decline of 6 % from 2021 – the worst percentage drop since 2018’s 10%.
“We are very confident that the commercial PC market will remain stronger than the consumer and education markets,” IDC analyst Ryan Reith told MarketWatch. “But it won’t be able to match the growth spurt during the pandemic in 2020 and 2021. The challenge remains inflation, the war in Ukraine, a lockdown in China and some ongoing supply chain issues.”
Another dynamic is COVID’s whipsaw-like impact on job security at companies, which benefited greatly from the pandemic’s hyper-growth days as homebound Americans overloaded with streaming, gaming, and social media.
After Netflix Inc. NFLX spent the better part of two years growing content and people while adding millions of new subscribers,
has imposed layoffs in recent weeks. Last month, it announced internally that it would lay off about 150 employees, including some in senior positions and in the animation department, who account for about 1.3% of the company’s 11,300 employees.
READ ALSO: Netflix Lays 150 Employees As Executives Look To Cut Costs
The harrowing circumstances at Netflix and elsewhere represent a jarring turn of events for employees who jump from one high-paying job to the next — sometimes in the space of a matter of months, jobs experts say.
“It’s certainly been a candidate market for the past several years,” Marty Reaume, chief people officer at Sequoia Consulting Group, told MarketWatch. She said 459 executives representing mostly California-based tech companies announced in March 2022 that more than 20% of their workforce left their jobs in 2021. The national average, by comparison, is around 15%.
“The curve couldn’t go up forever” of “frantic hiring” and “rising salaries,” Reaume said. “It got a bit ridiculous looking for talent. If this crazy market has some utility, things will settle down a bit.”