Tech layoffs approaching Great Recession levels: ‘It wasn’t sustainable or real’

The number of layoffs in the tech sector this year is approaching the annual levels seen during the Great Recession, but is far from dot-com-bust territory.

As tech companies grapple with falling stock prices, inflation, rising interest rates and a possible recession, they have announced more than 60,000 job cuts this year, with indications such as those of Amazon.com Inc. AMZN,
-1.63%
chief executive Andy Jassy; HP Inc. HPQ,
-1.13%
announcing cuts over the next three years; and a report that Google GOOG,
-0.84%

GOOGL,
-0.90%
is considering thousands of layoffs – that there will be more to come.

By comparison, about 65,000 tech jobs were lost each year in 2008 and 2009 during the recession, according to Challenger, Gray & Christmas. Whether all the cuts will reach levels not seen before during the dot-com meltdown, when nearly 300,000 tech jobs were lost in two years, remains to be seen.

Some longtime Silicon Valley observers and pundits say this downturn isn’t like the Internet company crashes of 2001 and 2002, because many of the companies that went bankrupt at the time weren’t from ” real” businesses. And while their estimates of how long this crisis will last vary, most agree the impact will be significant and will affect workers and others who power the industry.

This time around, companies making cuts may have grown too quickly or added too many employees during the pandemic and may need to reset or get back to normal, experts say. But they offer real goods or services, and they generate income.

For more: Here are the tech companies that have announced layoffs

“The dot-com bust was mostly, if not exclusively, companies that had no customers or revenue,” said Stephen Levy, director and senior economist at the Center for Continuing Study of the California Economy. “Companies that lay off, like Amazon, or freeze hiring, like Google or Apple AAPL,
-2.11%,
have millions and millions of customers and are profitable,” he added.

This tech downturn comes as no surprise to others like Levy, who have experienced the previous ones. Their forecasts range from cautiously optimistic to calamitous.

“Silicon Valley has cycles,” said Russell Hancock, CEO of Joint Venture Silicon Valley. “We go up, we go down. This happens with regularity about every 10 years. Hancock, who said he thought it was too early to say “the sky is falling,” added he believed the onset of the pandemic would trigger the downturn. Instead, he said, “the pandemic turned out to be a boon for technology… but it just turned out to be a peak and didn’t take us to a new plateau. Now the demand is decreasing.

But Tom Siebel, a billionaire serial entrepreneur whose latest title is CEO of C3.ai AI,
-1.05%,
is more pessimistic. “It’s just getting started,” he told MarketWatch. “Before this is over, everyone will feel the sting, businesses large and small. It will be difficult, but the industry will be healthy once we overcome it.

“All this strange and authorized behavior is coming to an end. No more people working in pajamas at home and being paid in bitcoin. This era will be a zinger, unfortunately,” he said. The downturn, he warned, will last at least two years and “will look like something out of the 1970s. This recession took 15 years to happen. Companies were printing literally billions of dollars a month. It was neither lasting nor real.

To better put the numbers into perspective:

  • Today’s tech job cuts also come close to the number of jobs lost in the industry when the COVID-19 pandemic upended everything. In 2020, 83,000 people in the tech industry lost their jobs, according to Challenger, Gray & Christmas.

  • The more than 60,000 jobs lost this year is approaching the equivalent of the number of U.S. tech jobs added by Silicon Valley’s top tech companies from 2020 to 2021, which was 68,558, according to an analysis of data from hired by the Silicon Valley Institute for Area Studies.

Some companies that are cutting jobs have their own reasons and circumstances, but most of them have been hurt by falling stock prices this year. Twitter’s dramatic staff cuts have everything to do with Elon Musk’s head start, but before he bought the company, its stock had traded as much as 73% below 54.20 $ he was paying per share. The slowdown in real estate activity affects related companies, which are relatively young. Yet other companies, such as ride-sharing giant Lyft Inc. LYFT,
+0.56%,
have been pressured to prove they can make a profit.

See: Hiring of technicians is slowing – these two charts explain how and why

“These are scary times: many technology companies have not experienced a downturn,” said Scott Russell, SAP SAP,
-1.00%
member of the board, told MarketWatch. “The mantra for almost all of the next few years is risk mitigation, cost containment and operational efficiency,” he added. Some companies already started doing these things at the start of the pandemic. Others, like Facebook’s parent company Meta Platforms Inc. META,
+0.63%,
nearly doubled in size in the past two years, and CEO Mark Zuckerberg blamed himself in his email to staff about the layoffs.

Tech workers of all stripes — those with varying levels of experience, or those on H-1B visas who need employer sponsorship to stay in this country — are losing their jobs, lists show. dismissals seen by MarketWatch.

Some will do better than others: ZipRecruiter data shows that there are still a good number of vacancies for higher positions: for example, for engineer 2 instead of engineer 1 .

And some tech industries are less affected than others, at least so far. A recruiter for semiconductor companies told MarketWatch that she saw few signs of a slowdown. Even Intel Corp. INTC,
+0.61%,
which has announced that it wants to cut costs, continues to hire except in certain places, she said.

Also: I was fired by a big tech company. What is my next career move?

Venture capitalists urge caution: “If you’re a growth-stage investor, now is probably not the best time to be at this stage of investing, in part because companies were overcapitalized and with unsustainable valuations,” said Barmak Mehta, founding partner. at Ballistic projects in Silicon Valley.

All of this will not only affect highly paid tech employees, but also other workers who are part of the giant tech ecosystem.

A licensed art service provider for tech companies told MarketWatch that he was disillusioned with the industry. “I’ve been through a few times now where companies took a sharp turn, a pivot,” he said. “Technology feels like there’s this cult, like ‘we’re innovators and we’re going to decide this is the next big thing,’ no matter how it affects a company and its employees,” he said. -he declares.

A former Twitter employee who was fired in early November after Musk took over the company and immediately cut its workforce in half has already fielded calls from potential employers, he told MarketWatch. This is because he has a lot of technical and managerial experience.

Does he think the downturn will help unions make inroads into tech? “I wish,” he said. “Getting these kinds of workers organized is even harder than in other industries, and it’s not easy anywhere.

But Maria Noel Fernandez, campaign director for Silicon Valley Rising, an alliance of labor groups and community leaders, hopes this time will present an “opportunity to build a labor movement within the tech industry and the Bay Area.”

Also: A $3 trillion loss: Big Tech’s awful year worsens

As for low-wage workers, they were among the first to feel the pain. The biggest janitorial and bus driver cuts in the San Francisco Bay Area since the pandemic happened in Meta just before mass layoffs of tech workers.

Luis Fuentes, divisional director of SEIU-United Service Workers West, said unionized Silicon Valley service workers had made “substantial gains” but the majority were earning less than $50,000 a year. . He worries about a possible erosion of the progress they have made if the cuts in the tech industry deepen or prolong.

“For someone who is laid off from Meta, that may mean that they are delaying their vacation – they have more leeway,” Fuentes said. “For service workers, it will depend on whether they can pay rent or put food on the table.”

MarketWatch senior reporter Jon Swartz, reporter Zoe Han and columnist Therese Poletti contributed to this article.

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