Layoff announcements dropped one after another, accelerating through the second half of 2022. Amazon began laying off what will be 18,000 employees. Lyft, the ride-sharing company, said it would lay off 700 of its employees, or 13% of its staff. Tech giants Meta and Twitter announced they were cutting thousands of employees.
The new year has brought even more bleeding in Silicon Valley: last week Google’s parent company Alphabet said it planned to lay off 12,000 of its employees, Microsoft said it would cut 10,000 employees and on Monday, Spotify said it would cut its workforce by 6 percent, around 600 people. Add up the losses and more than 216,000 tech workers 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 following the news on the economy and the recent months’ tumult over inflation, interest rates and the labor market. But the tech job cuts aren’t necessarily bad news for the economy as a whole, or even for Silicon Valley. (They make up about 4% of all tech workers.) In today’s newsletter, I’ll explain what the cuts mean for the broader economy.
Boom and bust
To understand why tech companies are laying off now, let’s go back to the pandemic, when the industry was booming. In 2020 and 2021, sales soared for companies like Amazon as e-commerce took off and consumers who suddenly spent a lot more time at home bought goods at a record pace.
The demand for workers grew rapidly and tech companies competed to hire talent. A virtual gold rush was underway for engineers, according to my colleague Tripp Mickle, a San Francisco-based journalist who covers Apple and the tech industry.
As the pandemic waned, many companies faced a new problem: They had been on a hiring spree, but now faced a possible recession — and heavy pressure from investors to cut spending.
“Now the technology is able to reset,” Tripp said. “But if you look at the fundamentals of most of these companies, they’re still pretty solid. It’s just that they’ve been through a period of accelerated growth, and the ability to sustain that is difficult.
Still, the layoffs contain at least one positive sign for the labor market: many traditional industries need tech employees, so this is an opportunity for those companies to recruit talent. The healthcare industry, the federal government, private retail or manufacturing companies all need engineers and others with high-tech skills. What Google’s loss could be Walmart’s gain.
But there is no sign that the layoffs will end anytime soon, especially since the Federal Reserve has hinted that it will continue to raise interest rates this year in an attempt to cool the economy.
Consider the tech industry’s place in the broader economy — and whether tech layoffs will spread to other industries.
One of the things that sets the tech industry apart is its reliance on valuation, as companies often raise a lot of money to invest in risky or unproven assets. Companies that are very forward-looking tend to take a hit when interest rates rise, which could partly explain the waves of layoffs, Jeanna Smialek, a Times reporter who covers the Federal Reserve and the economy.
The tech sector can be a leading indicator, telling us where the economy is heading before the rest of the economy goes.
“You don’t want to dismiss tech layoffs as meaningless,” Jeanna said. “They can sometimes be the canary in the coal mine.”
But she also warned not to read too much. In addition to being particularly sensitive to the market, the tech sector represents a very small slice of the overall workforce in the United States – about 2% of all jobs in the economy. Unemployment insurance claims remain very low overall and more than 10.5 million jobs are open across the country.
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SPORTS NEWS FROM ATHLETIC
Hall of fame: Scott Rolen, a 17-year big league veteran, will be the only player inducted into the Baseball Hall of Fame this year.
Series of shots of Hoyas: Georgetown beat DePaul last night, the Hoyas’ first win in the Big East in their last 29 games.
Star game: Bronny James, the son of LeBron James, will be participating in the McDonald’s All-American Game, an event that has hosted some of basketball’s biggest stars.
ARTS AND IDEAS
This year’s Oscar nominations
“Everything, Everywhere, All At Once,” the twisting adventure from the director duo known as the Daniels, has been nominated for 11 Oscars. Best Picture, Best Director and Best Actor awards go to its four stars, Michelle Yeoh, Ke Huy Quan, Stephanie Hsu and Jamie Lee Curtis. Among the other nominees:
Two big-budget action films, ‘Avatar: The Way of the Water’ and ‘Top Gun: Maverick’, received Best Picture nominations, alongside more traditional films like ‘Tár’ and ‘The Fabelmans. by Steven Spielberg.
Dark comedy ‘The Banshees of Inisherin’ and German war film ‘All Quiet on the Western Front’ earned nine nominations each.
Among the snubs: Jordan Peele’s “Nope” and action hit “The Woman King” were overlooked, and no women were nominated for Best Director.
Here’s the list of nominees and where to stream them.
PLAY, WATCH, EAT
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