What’s emerging in its place is an age of diminished expectations marked by job cuts and hiring slowdowns, slashed growth projections and shelved expansion plans. The malaise is damaging employee morale, affecting the industry’s ability to attract talent, and has wide-ranging implications for US economic growth and innovation.
Illustrations of a dour new business climate surface daily against the backdrop of a prolonged economic slowdown, a grinding war in Europe, rising interest rates and inflation, and a global pandemic dragging into its third year. In the past two weeks, a parade of big names joined the crowd. Social media app Snap Inc. on May 23 pruned sales and profit forecasts and said it will slow hiring. The next day, Lyft Inc. said it will bring on fewer people and look for other cost cuts. Days later, Microsoft Corp. tapped the brakes on hiring in several key divisions, and Instacart Inc. said it will dial back hiring plans to nip costs ahead of a planned initial public offering.
The drumbeat continued yesterday, as Tesla Inc. Chief Executive Officer Elon Musk told employees the electric-vehicle maker needs to reduce its salaried workforce by 10% and pause hiring worldwide. Cryptocurrency exchange Coinbase Global Inc. also said it will extend a hiring freeze and rescind a number of accepted job offers, citing market conditions.
Similarly gloomy pronouncements had already been dribbling out for weeks. Amazon.com Inc. has too many workers and too much warehouse space, and its business is hurting from rapidly rising inflation costs. Facebook parent Meta Platforms Inc. is easing hiring and paring expenses, and Twitter Inc. instituted a hiring freeze and withdrew some job offers ahead of a planned takeover by Musk. Apple Inc. warned in April that restrictions related to Covid-19 lockdowns in China will shave as much as $8 billion from revenue in the current quarter.
The humbled corporate ambitions signify a vibe shift for an industry that had seemed invulnerable, once offering workers and investors protection from the instability of the larger economy.
“They are no longer sure bets,” said Tom Forte, a tech analyst at D.A. Davidson, of the technology industry’s behemoths. “They aren’t sure bets because there are a number of fundamental things working against them.”
The Nasdaq Composite Index has lost a quarter of its value since Nov. 19, when it reached an all-time high. That’s even taking into account the index’s 5.8% rebound in the past 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 by 13 times from April 19 to May 19 compared with a year earlier. Layoff discussions increased by five times, and talk about a recession is up by 50 times. Unfounded speculation that Meta was gearing up for a round of firings ripped through social media in May, resulting in the creation of the hashtag #metalayoff, which began trending on LinkedIn. Dozens of recruiters and employers began using the hashtag to offer alternative job openings. A Meta spokesperson says the company has no current plans for staff reductions.
Still, what was once an engine of growth for the US economy has sputtered of late. More than 126,000 tech workers have lost their jobs since the beginning of the pandemic, according to Layoffs.fyi. Netflix Inc. said last month it’s laying off about 150 workers after reporting an unexpected subscriber loss; the streaming giant’s shares have tumbled 71% since mid-November. At Meta, managers are slowing hiring for many mid-to-senior level positions companywide, and in April cut back on adding engineers with limited experience.
Twitter employees, meanwhile, are bracing for potential layoffs as the company awaits the arrival of new owner Musk, whose pitch to bankers included cost cuts. CEO Parag Agrawal jumped ahead in early May, sending Twitter’s 7,500-plus employees a note explaining the social network would start with reductions in travel, marketing and event costs, with leaders told to “manage tightly to your budgets, prioritizing what matters most.”