In the span of weeks, the United States’ Silicon Valley which has been a reliable source of high-paying jobs and booming stocks is now witnessing a tough time with major big tech companies including Meta, Twitter, Snap, and Microsoft announcing mass layoffs, which have tens of thousands of people unemployed.
On Monday, joining what many have called the “lay off season”, New York Times first reported that Amazon is planning to lay off as many as 10,000 people in “corporate and technology” departments across the world. This was preceded by Meta, Facebook’s parent company, which also operates Instagram and WhatsApp, announcing job cuts affecting at least 13 per cent of the company.
Why is this happening?
The two prominent reasons that most companies who have given a public statement following the announcement of mass layoffs are that they hired many employees during the pandemic when people spent most of their time online, as opposed to now when the boom is starting to fade as they get back to their daily lives. Secondly, soaring inflation in the US has made brands reluctant to spend money on advertising.
According to Layoffs.fyi, a website that tracks tech layoffs, 217,404 employees across more than 1,300 tech companies have been fired since the Covid-19 pandemic. The companies that were once thriving are now facing a major downturn and one of the main reasons that are seen across most of them is the reduction in demand.
Several reports have attributed the “boom” that the big tech witnessed during the pandemic to the lockdowns which had forced people indoors, essentially bringing their daily lives to a grinding halt. Amid the pandemic-induced lockdowns, people spent more time on online shopping, social media, and streaming content, which led to an overall increase in demand.
However, as the lockdowns were lifted across the world and people went back outside, the demand was reportedly slower in comparison. This was in addition to the soaring inflation that the United States is currently witnessing that has led digital advertisers to cut back on spending on ads which nearly all tech companies rely on for revenue.
Meanwhile, the Federal Reserve in a bid to control the four-decade-high inflation has been increasing interest rates. Earlier this month, the central bank announced its fourth straight increase of 0.75 percent. “We’ve seen a surge in layoffs in recent weeks because it’s becoming obvious that the (Federal Reserve) will need to keep increasing interest rates for longer than originally expected,” Roger Lee, founder of Layoffs.fyi, told TIME.
He added, “Unfortunately, the pain won’t end until the Fed is able to get a handle on inflation.” Citing media reports, the website has also estimated that more than 24,000 tech workers across 72 companies have been laid off in November. This also comes amid reports of a possible global recession.
What has happened so far?
This year more than 121,000 employees from nearly 800 tech companies have been fired. Notably, the highest number of layoffs was seen in the month of November. Additionally, accounting for the biggest tech layoffs since the pandemic, the report by layoffs.fyi, said that Meta is currently at the top of the list after it announced that it would lay off at least 11,000 employees.
As mentioned earlier, reports suggest that Amazon plans to lay off at least 10,000 employees as early as this week and will focus on the company’s devices unit and several products including Alexa and other appliances, as well as the retail division and the e-commerce giants’ human resources department. Amazon laying off employees is significant as it has previously been the most stable employer in tech and if confirmed this would be the biggest layoffs in company history.
This was preceded by Twitter which reports later confirmed fired at least 50 percent of their workforce after the billionaire Tesla CEO Elon Musk took over the microblogging platform in a $44 billion deal. Amid the mass layoffs, co-founder and former CEO Jack Dorsey had taken to the platform and accepted the responsibility and apologized for growing the “company size too quickly”.
Furthermore, Microsoft had also laid off nearly 1,000 employees across different units worldwide, first reported by Axios which was later confirmed by the company citing the impending slowdown in revenue.
Earlier this year, Snap Inc. the company behind Snapchat said that by the end of August it will cut its workforce down by at least 20 percent which affected nearly 1,200 people. This was followed by Intel which according to a report by Bloomberg was set to lay off at least 20 percent of its staff, however, the company is yet to officially confirm the number. (Wion With inputs from agencies)