Silicon Valley layoffs go from bad to worse | CNN Business
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, Jassy offered a troubling update on that review: Amazon is cutting more than 18,000 jobs, nearly double the 10,000 previously reported and marking the highest absolute number of layoffs of any tech company in 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 household 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 where the people at these companies are preparing for things to get worse.
On the same day Amazon announced the layoffs, cloud computing company Salesforce said it was cutting about 10 percent of its workforce, a number that easily runs into the thousands, and the outlet video maker Vimeo said it was cutting 11% of its workforce. The next day, digital fashion platform Stitch Fix said it planned to cut 20% of its salaried workforce, after cutting 15% of its salaried workforce last year.
The ongoing industry fallout comes as technology companies struggle with 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 hit to demand as Covid-19 restrictions eased and people returned to their offline lives. Rising interest rates also dried up the easy money tech companies relied on to fuel big bets on future innovation and dented their sky-high valuations.
Heading into 2023, recession fears and economic uncertainties continue to weigh 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 certain tech companies some cover to take more severe cost-cutting measures now than they might have otherwise.
While there have been some recent layoffs in the consumer goods sector and signs of more elsewhere, the situation in Silicon Valley continues to contrast with the broader economy.
The latest jobs report from the Labor Department on Friday pointed to a year of extraordinary job growth in 2022, marking the second-best year for the labor market on records dating back to 1939. Meanwhile, a separate report from the of relocation Challenger, Gray & Christmas found tech layoffs rose 649% in 2022 compared to the previous year, compared to just a 13% increase in job cuts in the global economy over the same period.
In his memo to employees this month, Jassy pointed to the need for significant cost reductions at Amazon in “the uncertain economy and that we’ve hired quickly over the last few years.” Others in the industry have echoed these points, with varying degrees of atonement.
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 own misreading of how the demand for technological products fueled by the pandemic would occur.
Benioff began a memo to Salesforce employees last week by invoking, as he often does, the Hawaiian word for family. “As ‘Ohana,'” he wrote, “we’ve never been more critical to our customers’ mission.” But the economic environment was “challenging,” Benioff wrote. “With that in mind, we’ve made the decision very difficult to reduce our workforce by 10 percent, especially in the coming weeks.”
“As our revenue accelerated through the pandemic, we hired too many people that led to this economic downturn that we’re facing, and I take responsibility for that,” Benioff said. Like other tech leaders, however, it’s unclear whether Benioff will face any repercussions to his title or compensation.
Patricia Campos-Medina, the executive director of the Worker Institute at Cornell University’s School of Industrial and Labor Relations, called this series of mea culpa “empty apologies” to workers who are now paying for their mistakes calculation
While there will be a lot of near-term uncertainty for these tech workers, as well as “a big economic impact on 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’ll 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 Last week’s Salesforce and Amazon layoffs “add to a 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 ’80s rock stars to keep up with demand,” he added.
And despite the strong overall labor market, there is growing concern that tech layoffs could spread elsewhere.
“I think we are seeing a turning 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 in the broader economy by the end of the first quarter,” said John Leer, Morning Consult chief economist CNN chief business correspondent Christine Romans in an interview Friday.
In this respect, at least, Silicon Valley may be ahead of the curve again, but not in the way it wants to be.