Executives across the tech industry overestimated the sector’s resilience following pandemic-era shifts in demand, leading to overstaffing at companies that has led to tens of thousands of employees getting laid off across the industry.
Co-founders of payment processor Stripe said they were “much too optimistic” about the health of the “internet economy” in a Nov. 3 email, announcing cuts of roughly 1,000 employees. More recently, Meta CEO Mark Zuckerberg apologized to employees for overestimating the company’s success following a pandemic era business boom, forcing a cut of more than 11,000 employees, according to The Wall Street Journal. (RELATED: Musk Tells Twitter Staff ‘Bankruptcy Isn’t Out Of The Question’ As Executives Jump Ship Over Privacy Concerns: REPORT)
“The tech sector relies heavily on short-term debt that constantly needs to be rolled over. Record-low rates (the Fed’s benchmark rate was .07% at the start of the year) have been a boon for the industry—particularly its stock prices—over the last couple years, but now higher rates (same benchmark is at 3.83%) are penalizing companies that took on significant debt,” Heritage Foundation economist E.J. Antoni said in a statement to the Daily Caller News Foundation. “The lure of ‘free money’ caused many tech giants to borrow even though they had large cash reserves.”
More than 119,000 tech sector employees have already been laid off this year, according to layoff-tracking website Layoffs.fyi through Nov. 11. While the most losses came in recruiting, human resources and sales, even engineers and other roles were impacted, the website’s founder, Roger Lee, told CNN Nov. 9.
“Tech has been clobbered so much precisely because it has been seen as very immune to fluctuations in the real economy, but in the end, nobody is immune,” Nikolai Roussanov, professor of finance at the Wharton School of the University of Pennsylvania, told CNN. “And that realization, I think, is important and perhaps what contributed to these sky-high valuations coming down pretty quickly.”
The job market in tech has not been this bad since 2007-2008 and looks firmly like we’ve entered a recession job market. Hiring freezes at Big Tech – and slowdowns elsewhere – and layoffs across the industry.
— Gergely Orosz (@GergelyOrosz) November 7, 2022
The about-face is perhaps seen most starkly at Meta, which surged from 48,268 employees in March 2020 to more than 87,000 in 2022, according to CNN. Its Wednesday cut shed roughly 13% of the company’s staff, according to the WSJ.
While Amazon has not announced a major headcount reduction this year, it announced a corporate hiring freeze on Nov. 3. The e-commerce giant is currently undergoing a cost-cutting review, which included asking employees to re-apply for jobs within the company since their positions no longer existed, according to the WSJ Nov. 10.
Meta and Google reportedly made a similar request to hundreds of employees earlier this year.
Layoffs have impacted popular brands from across the sector, including Netflix, Peloton, Shopify and Snap, according to the WSJ.
Meta, Google, Amazon and Twitter did not immediately respond to a Daily Caller News Foundation request for comment.
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