The reason why tech companies layoffs / hiring freezes. As tech companies struggle with the impact of stagnant consumer spending, high interest rates and a strong dollar, they are once again putting the brakes on hiring.
One of the clearest indications that an economic downturn is knocking on the door has started to flash red this week as some US tech companies announced massive layoffs or hiring freezes.
Amazon has announced that it will no longer fill certain corporate positions, while Apple has said it will stop hiring in most departments. In doing so, they join other mega-cap tech companies, including Facebook parent company Meta and Google, which have frozen hiring in the past few months.
Meanwhile, younger tech companies, including payments provider Stripe and ride-hailing company Lyft, have filed for layoffs – both said the deteriorating economy is making it increasingly unfavorable for tech. Elon Musk, the new owner of Twitter, is expected to lay off half of the social media company’s workforce of 3,700.
Over the past decade, tech companies have boasted tremendous growth and also spent lavishly. But with a global recession on the horizon that could be much longer and harsher than many expected, Silicon Valley firms, which announced massive layoffs this week, could be a precursor to the larger economy.
According to an October survey by KPMG, most US CEOs (more than 90%) believe a recession is already on the way, with more than half saying they plan to layoffs in the next six months.
Amazon. The e-commerce giant stopped “new tier” hiring in its corporate workforce, with a decision taken by CEO Andy Jassy and his team this week. “We hope to hold this pause in place over the next few months and will continue to monitor to adjust what we see in the economy and business to what we think is reasonable,” said Beth Galetti, Amazon’s senior human resources manager.
Intel. The chipmaker said last week that Intel Corp is cutting jobs and slowing spending on new facilities in an effort to save $3 billion next year. The goal is to save up to $10 billion by 2025. Bloomberg News previously reported that the reduction in staff numbers could reach thousands.
Lyft. Lyft’s cost-saving efforts include divestment of its car service business. Prepared to announce its 3Q22 results on Monday, the company said it would freeze hiring in the US until at least next year. Now it faces even stronger winds.
“We are not immune to the realities of inflation and a slowing economy,” co-founders John Zimmer and Logan Green said in a note: “2023 should be a time when we can better execute without having to change plans in response to outside events – and the hard truth is that today’s actions It prompted us to do that.”
Stripe. Payments company Stripe Inc., one of the world’s most valuable startups, is laying off more than 1,000 jobs. The 14% staff reduction will bring the headcount back to almost 7,000 – the February total. Co-founders Patrick and John Collison told staff they needed to cut spending more broadly as they prepared for “leaner times.”
Twitter. The turmoil on Twitter is more about the recent purchase and the accompanying debt, rather than economic concerns. But the company is currently facing the deepest cuts of its peers. Musk, who bought Twitter for $44 billion last month, plans to lay off about 3,700 people, according to people with knowledge of the matter.
The new owner is said to plan to notify affected employees on Friday. Musk also aims to reverse the company’s work-anywhere policy and require remaining employees to report to the offices.
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