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The tech layoffs that began as a trickle in early 2022 then turned into a tsunami late last year show no signs of abating as companies work to undo excessive hiring made during the pandemic.
As of Feb. 27, more than 120,000 tech employees have lost their jobs in 2023, said Roger Lee, founder of Layoffs.fyi, which tracks layoffs in the tech sector.
“That means we’re already three-fourths of the way toward the number of employees laid off in all of 2022, which was 159,000,” he said in an email exchange with Investor’s Business Daily.
Asked if he expects the accelerated pace of layoffs to slow, Lee said, “Not in the short term.”
The current spate of job cuts reached a blistering pace beginning in October. From then through January, 147,000 tech layoffs were announced.
Nearly half came from tech giants Amazon (AMZN), Google-parent Alphabet (GOOGL), Facebook-owner Meta Platforms (META), Microsoft (MSFT) and Salesforce (CRM).
More Tech Layoffs Might Be In The Works
An indicator that more tech layoffs may be in the works comes from Meta, which cut 11,000 jobs in November, or 13% of its workforce. But according to the Washington Post, Meta is preparing for a fresh round of job cuts. The downsizing could hit thousands more workers.
Further, Twilio (TWLO), which cut its staff by 11% in September, has announced it would cut another 11%.
How did tech companies get in this position? Starting in mid-2020, the sector went on a hiring spree, fueled by low interest rates and high demand for such tech products cybersecurity and cloud computing, Lee said.
Meanwhile, the Covid-19 lockdown meant that experiences like travel or restaurants largely came off the table. As a result, people began shifting their discretionary spending to buying products from tech companies.
That created a rapid rise in e-commerce. So companies like Amazon hired furiously, assuming that consumers would use e-commerce at an accelerating pace once the pandemic ended.
Consumers Reverted to Pre-Pandemic Spending
However, it wasn’t long before consumers reverted to their pre-pandemic spending pattern. That prompted Amazon to review its costs and pare back on business units that were unprofitable.
“Now that we’re in a completely opposite environment, these same tech companies are performing layoffs to undo the overhiring during the past couple of years,” Lee said.
Chief executives at technology companies presented various reasons to employees for tech layoffs. But overhiring was a common theme.
Mark Benioff is CEO at Salesforce, which recently cut 8,000 jobs. In a note to employees at the time, Benioff said: “As revenue accelerated through the pandemic, we hired too many people, leading into this economic downturn we’re now facing.”
When Google cut 12,000 workers, CEO Sundar Pichai told employees, “Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.”
Doing More With Less
And as Microsoft cut 10,000 jobs in January, CEO Satya Nadella said customer spending surged, then retreated.
“First, as we saw customers accelerate their digital spend during the pandemic, we’re now seeing them optimize their digital spend to do more with less,” he told employees during the company’s recent round of reductions. “We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one”
Besides tech, layoffs have spread into other sectors. Entertainment giant Disney (DIS) is cutting 7,700 jobs. Automaker Ford (F) is planning to ax 3,800 jobs in Europe. 3M (MMM) is eliminating 2,500 manufacturing jobs globally. And chemical developer Dow (DOW) is laying off 2,000.
Concerns over economic weakness also have led to a sharp pullback in digital advertising. That has hammered social media companies, which count on digital advertising for almost all their revenue.
As to when the cutbacks might ease in the coming months, Lee said to keep an eye on interest rates. The recent wave of tech layoffs have tracked closely with the rise in interest rates over the past year.
“If and when interest rates stabilize or even decline, which is currently projected to happen sometime this year, I believe we’ll see layoffs start to subside as well,” he said.
Please follow Brian Deagon on Twitter at @IBD_BDeagon for more on tech stocks, analysis and financial markets.
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