What is emerging instead is an era of lowered expectations marked by job cuts and hiring slowdowns, slashed growth projections and shelved expansion plans. The unrest is hurting employee morale, hurting the industry’s ability to attract talent, and has broad implications for America’s economic growth and innovation.
Illustrations of a bleak new business climate emerge daily against the backdrop of a protracted economic slowdown, a grueling war in Europe, rising interest rates and inflation, and a global pandemic creeping into its third year. In the past two weeks, a parade of big names has joined the crowd. On May 23, social media app Snap Inc. scrapped sales and earnings forecasts and said it will cut hiring. The next day, Lyft Inc. said it will hire fewer people and seek other cost cuts. Days later, Microsoft Corp. halted hiring at several key divisions, and Instacart Inc. said it will scale back hiring plans to cut costs ahead of a planned initial public offering.
The drumming continued yesterday, as Tesla Inc. CEO Elon Musk told employees the electric vehicle maker needs to cut its salaried workforce by 10% and halt hiring worldwide. Cryptocurrency exchange Coinbase Global Inc. also said it will extend a hiring freeze and terminate a number of accepted job offers, citing market conditions.
Equally grim pronouncements had already been trickling out for weeks. Amazon.com Inc. has too many workers and too much warehouse space, and its business is suffering from rapidly rising inflationary costs. Facebook parent Meta Platforms Inc. is making hiring easier and cutting costs, and Twitter Inc. instituted a hiring freeze and pulled some job postings ahead of a planned acquisition by Musk. Apple Inc. warned in April that restrictions related to Covid-19 lockdowns in China will cut as much as $8 billion from revenue in the current quarter.
The humble corporate ambitions signify a change of scenery for an industry that once seemed invulnerable, offering workers and investors protection against instability in the wider economy.
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“They are no longer safe bets,” Tom Forte, a technology analyst at DA Davidson, said of the tech industry giants. “They are not safe bets because there are a number of fundamental things that are working against them.”
The Nasdaq Composite Index has lost a quarter of its value since Nov. 19, when it hit an all-time high. That even taking into account the 5.8% rebound of the index in the last two weeks.
The specter of job cuts has begun to haunt the Silicon Valley psyche. On Blind, an app that employees can use to talk anonymously about their employers, discussions about hiring freezes increased 13 times from April 19 to May 19 compared to the previous year. Discussions about layoffs increased five times and talks about a recession increased 50 times. Unfounded speculation that Meta was preparing for a round of layoffs spread across social media in May, resulting in the creation of the hashtag #metalayoff, which started trending on LinkedIn. Dozens of recruiters and employers began using the hashtag to offer alternative job offers. A Meta spokesperson says the company has no current plans to downsize.
Still, what was once a growth engine for the US economy has lately failed. According to Layoffs.fyi, more than 126,000 tech workers have lost their jobs since the start of the pandemic. Netflix Inc. said last month it will lay off about 150 workers after reporting an unexpected loss of subscribers; Shares of the streaming giant have fallen 71% since mid-November. At Meta, managers are reducing hiring for many mid- to senior-level positions across the company, and in April they reduced the hiring of engineers with limited experience.
Meanwhile, Twitter employees brace for possible layoffs as the company awaits the arrival of new owner Musk, whose pitch to bankers included cost cuts. CEO Parag Agrawal stepped up in early May, sending Twitter’s more than 7,500 employees a note explaining that the social network would start with reductions in travel, marketing and event costs, and would tell leaders that they “manage their budgets strictly, prioritizing what matters most”.
Similarly, Uber’s Dara Khosrowshahi said in a memo to staff that the ride-sharing giant would “treat hiring as a privilege and be deliberate about when and where we add the number of employees.” The sentiment is affecting morale internally, said an Uber employee who asked not to be identified.
The shock is probably greatest at companies like Meta, Twitter, and Uber, which were still in a relatively early stage the last time the tech industry was hit, during the 2008 financial crisis. dotcom bubble. turn of the century construction. The difference this time is that the pandemic has reinforced the importance and necessity of many of these tech products, giving them some cushion against the initial economic ravages of the Covid-19 shutdowns.
“Everyone found that technology was not just nice, it was indispensable,” said Russell Hancock, executive director of Joint Venture Silicon Valley, a nonprofit organization that studies Silicon Valley and its economy. What’s happening now appears to be a market correction, Hancock added, though he, too, worries that some of the tech industry’s brilliance and innovation will fade as products like streaming services and social media become more useful.
It is possible that “we begin to think about [tech] something like the gas lines that go to our houses, or electricity,” he said. “That is something new for Silicon Valley. It’s kind of a Detroit existence where cars became the backdrop, the furniture of the region.”
With companies bracing for a long season of uncertainty about their business, they have to make tough investment decisions beyond hiring and marketing. Amazon, which in 2020 invested heavily in the staff and warehouse space it needed to meet a pandemic-related spike in delivery demand, now finds itself with too many warehouses and too many workers.
The Seattle-based company’s announcement that it has more space than it needs has spooked hundreds of employees at its real estate division, according to a person familiar with the situation. Employees who used to juggle multiple construction projects suddenly have little to do and have been advised by their managers to use extra time to focus on “learning and development,” which hasn’t been reassuring, the person said.
Meta CEO Mark Zuckerberg said in February that the company was prioritizing some efforts from products like competitor TikTok Reels, private messaging and the metaverse. “We’re shifting most of the energy within the company to those high-priority areas,” Zuckerberg said in April. The company said it was cutting expenses by $3 billion by 2022, the first sign that it is becoming more judicious with its investments.
The aura of invincibility may be fading, but Silicon Valley is far from dead. Unemployment in the California region is just 2%, the lowest since 1999, according to the Joint Venture. Additional data from the Center for the Continuing Study of the California Economy found job growth in the Bay Area over the past year of 5.8%, faster than the national and state averages.
Any slowdown in hiring needs to be framed in the context of technology’s meteoric rise, says Stephen Levy, director and senior economist at CCSCE. “Does the world want more of the goods and services that technology produces, and is that a growing sector over time?” Levy said. “The answer is yes.”