Tech is downsizing, as witnessed by the flurry of layoff announcements that dropped one after another, accelerating throughout the second half of 2022. Amazon began laying off what will be 18,000 employees. Lyft, the ride-share company, said it would dismiss 700 of its workers, or 13 percent of its staff. The technology giants Meta and Twitter announced that they were cutting thousands of employees.
The new year brought even more pain in Silicon Valley: Last week, Google’s parent company, Alphabet, said it planned to lay off 12,000 of its workers, Microsoft said it would cut 10,000 employees and on Monday, Spotify said it would reduce its staff by 6 percent, about 600 people. Add up the losses and more than 216,000 tech employees have been laid off since the start of 2022, according to Layoffs.fyi, a site that tracks job cuts in the sector.
The layoffs have an ominous feel to anyone who is tracking news on the economy and the tumult in recent months relating to inflation, interest rates and the labor market. But the tech job cuts are not necessarily bad news for the economy overall, or even for Silicon Valley. They account for about 4 percent of the tech sector’s total workers.
To understand the current spate of layoffs we need to turn back to the pandemic, when the industry was booming. In 2020 and 2021, sales spiked for companies like Amazon, as e-commerce took off and consumers who were suddenly spending much more time at home were buying goods at a record pace.
Demand for workers quickly escalated, and tech companies were competing against each other to hire talent. But as the pandemic waned, many companies faced a new problem: They had been on a hiring binge, but now they were confronting a possible recession — and heavy pressure from investors to scale back.
Now, tech is in a position of resetting itself. They went through a period of accelerated growth, and the ability to sustain that is difficult. The optics of so many layoffs may be worse than the reality they represent. The layoffs contain at least one positive sign for the labor market: A lot of traditional industries need tech employees, so this is an opportunity for those companies to scoop up talent. The health care industry, the federal government, private companies in retail or manufacturing — all of them need engineers and other people with high-tech skills. What is Google’s loss could be Walmart’s gain.
But there are no signs that the layoffs will end anytime soon, especially as the Federal Reserve has suggested that it will keep increasing interest rates this year to try to cool the economy.
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