With recession fears mounting, prices continuing to climb and the fallout from the pandemic continuing to take their toll, many tech companies are being forced to rethink their staffing needs. Waiting to publish their quarterly earnings reports, some have announced that they will postpone their hiring plans and reduce their job offers, knowing that the fall will be full of difficulties. “There is no doubt that companies will spend less and cut budgets. None of that is good news for the next quarter,” said Paul Verna, an analyst at Insider Intelligence, a market research firm.
The sector has been in trouble for months. In April, the founder of Amazon, Jeff Bezos, already warned that the boom that technology had experienced during the pandemic would soon come to an end. At the beginning of the year, Apple lost the status of the most valuable company in the world, which contributed to a sharp drop in the Nasdaq Composite index, which in April plummeted 13%.
Last week, the United States Department of Labor published data on the consumer price index for June, which, rising 9.1%, marked another record in the last 40 years. Some numbers that have exceeded the forecasts of the experts and that put more pressure on the Federal Reserve to increase interest rates more quickly and thus tighten its monetary policy. The more aggressive action by the US central bank feeds investors’ fear that the economic deterioration will occur faster than expected and prompts them to move their shares in safer areas of the market.
Faced with uncertainty, companies take cover and rethink their priorities so as not to lose competitiveness. Alphabet, the parent company of Google, is slowing its recruitment efforts. According to an internal memo picked up by Bloomberg, CEO Sundar Pichai told employees that although the company added 10,000 workers in the second quarter, it will slow the pace of hiring for the rest of the year and prioritize technical and engineering talent. “Like all companies, we are not immune to headwinds,” he noted. The search giant had almost 164,000 employees at the end of March. In the same vein, Apple it plans to curb hiring and spending in some divisions next year to weather the economic slowdown.
Cryptocurrency exchange Coinbase announced in June that it would lay off around 18% of its workforce and rescinded job offers. “It seems that we are entering a recession after an economic boom of more than 10 years. While it is difficult to predict the economy or the markets, we always plan for the worst so that we can operate the business in any environment,” said CEO Brian Armstrong on the Coinbase blog.
Tesla also informed its workers that it plans to lay off 10% of its workforce and Meta plans to cut engineering hiring plans by 30%, according to Reuters. “If I had to bet, I’d say this could be one of the worst recessions we’ve seen in recent history,” company CEO Mark Zuckerberg told employees during a weekly question-and-answer session to which the news agency had access. In 2021, the Facebook company announced a shift in its business from social networks to virtual reality. In addition, it is struggling to renew its content and retain users, particularly younger ones, as they increasingly migrate to competitors like TikTok.
Layoffs on Netflix
Multimedia services, after benefiting during the lockdown, are already facing a slowdown in their expansion, with inevitable consequences. Netflix has carried out several rounds of layoffs since reporting the loss of 200,000 subscribers in the first quarter. In April, it began winding down some marketing initiatives, then laid off 150 employees in May and 300 in June, Bloomberg reports. Spotify, for its part, is cutting employee growth by about 25% to adjust for macroeconomic factors, CEO Daniel Ek said in a note to staff last month.
Bad news that, in addition to disappointing recent graduates looking for work, could harm the prestige of large technology companies. “While companies may be saving some money in the short term, they risk potentially catastrophic reputational damage,” Brian Kropp, distinguished vice president of the human resources practice at consultancy Gartner, told Reuters.
We want to give thanks to the author of this post for this incredible content
The big technology companies prepare adjustment plans in the face of fears of recession