The Great Resignation is pivoting to a Forced Resignation.
Thousands of layoffs in the tech sector, compounded by hiring freezes and a slowdown in hiring, highlight the abrupt shift in fortunes over the past several months as a result of rampant inflation, fear of stagflation and recession, supply-chain interruptions, the war in Ukraine, an ailing stock market and other red-alert economic factors.
The latest blows came Tuesday, when Coinbase Global Inc. COIN, +6.63% announced an 18% layoff of about 1,100 people and real-estate brokerage Redfin Corp. RDFN, -0.92% said it would reduce head count by about 470 people, or 6% of its workforce.
Read more: Redfin to cut 470 jobs, stock sinks toward record low
“Everybody needs to batten down the hatches. We are in stormy, stormy seas with choppy weather on the horizon,” media titan Jeffrey Katzenberg, a board member and investor in cybersecurity startup Aura, told MarketWatch.
In recent weeks, a broad cross-section of companies across all sectors have announced layoffs or plans to limit hiring amid the economic crucible. In addition to Coinbase and Redfin, Peloton Interactive Inc. PTON, +3.97%, PayPal Holdings Inc. PYPL, +2.08%, Tesla Inc. TSLA, +2.45%, Carvana Co. CVNA, +14.75% and others said they intend to slash staff. At the same time, some of tech’s biggest players — Facebook parent company Meta Platforms Inc. META, +1.69%, Intel Corp.’s INTC, +1.57% client-computing group, Microsoft Corp. MSFT, +1.94%, Uber Technologies Inc. UBER, +3.41% and Lyft Inc. LYFT, +5.01% — are slowing down or freezing hires.
All told, at least 15,000 tech-related jobs have been or will be eliminated, according to Layoffs.fyi, a website that tracks job cuts at startups.
“ ‘The market cap aggregate of about 300 publicly traded tech companies with operations in San Francisco and the valley is at its lowest now, $9.98 trillion, since 2013 after peaking at nearly $15 trillion in November 2021.’”
Downturns in spending on PCs, tablets and advertising have only added to the tumult, and there are whispers that even cloud-computing — which led a wave of internet expansion the past decade — could be flattening. It’s all contributed to a convulsive shift from hiring binge to belt-tightening, especially among startups.
“It’s been a challenging last three years with the pandemic, and another two coming with secular [economic] headwinds,” Starz Chief Executive Jeffrey Hirsch told MarketWatch.
The affect has been most pronounced among Silicon Valley startups, say local economists. “With the uncertainty of recession, a slowdown in short-term demand and possibly more rate hikes, understandably there will be a pause for startups and, for in the short term, for the really big players,” Stephen Levy, director and senior economist of the Center for Continuing Study of the California Economy, told MarketWatch.
Diminished prospects and a balky market have already delayed the IPO dreams of startups. For larger companies, the impact is more subtle. Major expansion is still on for Google in Mountain View, Calif., and San Jose, and for Meta in Menlo Park, Calif., and nearby Moffett Park, but it remains to be seen if they will fill those facilities with people as quickly as originally planned. “It may take them longer, perhaps 12 months, before things pick up again for big tech,” Levy said.
Representatives from tech’s largest companies are mostly mum on their hiring plans, though Amazon.com Inc. AMZN, +3.94% said it is aggressively adding staff. “With tens of thousands of corporate and tech roles currently available, we continue to look for talented individuals to help us build the future of retail, robotics, health care, devices, cloud computing, and more,” Amazon spokesperson Kelly Nantel told MarketWatch.
For now, Big Tech is taking a beating in market valuation. The market cap aggregate of about 300 publicly traded tech companies with operations in San Francisco and the valley is at its lowest now, $9.98 trillion, since 2013 after peaking at nearly $15 trillion in November 2021, says Rachel Massaro, vice president of research at the Silicon Valley Institute for Regional Studies.
“There is certainly a confluence of things that are making everyday life difficult,” Massaro told MarketWatch. “That is a huge impact trickling down to companies, management, and the hiring level.” [The unemployment rate in Santa Clara and San Mateo counties, in the heart of the valley, is at a 22-year low of 2.05%, though that could change if layoffs pick up and hiring clamps down.]
Like nearly everyone else, cybersecurity startup Aura is closely monitoring costs and bracing for a challenging macro-climate “for years” between inflation, war, supply-chain issues and a post-COVID climate, Aura CEO Hari Ravichandran told MarketWatch. “This is impacting the entirety of the business ecosystem,” he said.
Adding to the economic uncertainty: Demand for PCs and tablets are headed for their worst decline in several years, according to a new forecast from International Data Corp. Global shipments of traditional PCs will fall 8% year-over-year to 321.2 million units in 2022 — the steepest drop since 10% in 2015. Meanwhile, worldwide tablet shipment forecasts were lowered to 158 million, down 6% from 2021 — its worse percentage decline since 10% in 2018.
“We feel very confident that the commercial PC market will remain stronger than the consumer and education markets,” IDC analyst Ryan Reith told MarketWatch. “But it will not match the growth surge during the pandemic in 2020 and 2021. The challenge remains inflation, the war in Ukraine, a lockdown in China, and some lingering supply-chain issues.”
Another dynamic is the whip-saw-like impact of COVID on job security at companies that greatly benefited from the hyper-growth days of the pandemic, when homebound Americans splurged on streaming, gaming and social media.
After spending the better part of two years ramping up on content and people while it amassed millions of new subscribers, Netflix Inc. NFLX, +6.28% has imposed layoffs in recent weeks. Last month, it internally said it was laying off about 150 employees, including some in the executive ranks and in the animation division, which account for about 1.3% of the company’s 11,300-person workforce.
Read more: Netflix lays off 150 workers as executives look to cut costs
The jolting circumstances at Netflix and elsewhere represent a jarring turn of events for employees who were jumping from one high-paying gig to another — sometimes, within a matter of months, say jobs experts.
“It was certainly a candidates’ market the last couple of years,” Marty Reaume, chief people officer at Sequoia Consulting Group, told MarketWatch. She said 459 business leaders representing mostly California-based tech companies disclosed in March 2022 that more than 20% of their workforce left their jobs in 2021. The national average, by comparison, is about 15%.
“The curve couldn’t go up forever” of “frenetic hiring” and “rising salaries,” Reaume said. “It was getting a little ridiculous scouring for talent. If there is any benefit to this crazy market, things will settle down a little bit.”