For tech giants like Meta, feverish pandemic growth is now followed by layoffs
For tech giants like Meta, feverish pandemic growth is now followed by layoffs
There’s a lot of talk of layoffs happening in tech right now. Meta is reportedly planning to lay off thousands of employees this week. There is, of course, the mess happening at Twitter; the company laid off half of its employees on Friday and is now trying to rehire some of them. Cuts have also happened at Stripe and Lyft.
But how much we should lean into layoffs in one industry as a sign of what might happen in the greater economy?
Remember that time a couple of years ago when the world shut down and a lot of us spent a lot of time hiding from a deadly virus? And we turned to social media and video conferencing and online shopping.
“That put all these tech companies behind the eight ball in terms of having enough people in place to deliver on all the demand,” said Sahak Manuelian, managing director at Wedbush Securities.
While so many Americans were being laid off, he said tech was on a hiring spree. Meta hired 13,000 employees in 2020 alone. It’s like the industry got a shot of espresso and now we’re at the caffeine crash.
“A lot of companies made very aggressive investments, perhaps inferring that the good times would continue and, to a large extent, they just haven’t,” said Scott Kessler, a tech analyst at Third Bridge.
Some companies made big pivots. Remember, Meta was still Facebook until a year ago. Others placed bets on pandemic consumer behavior that just didn’t stick. Case in point: Peloton. And in the fast-paced world of tech, these gambles — and the hiring and firing of employees that go with them — are just a part of doing business. In some ways, the industry is its own beast.
But it’s also becoming a leading economic indicator, according to Teresa Ghilarducci, a labor economist at The New School. “I think tech is the new steel and auto industry.”
Companies have always looked to leading industries for guidance, she said. Meaning, if tech is cutting costs, it sends a message to others that maybe it’s time to cut costs too.
Correction (Nov. 8 2022): A previous version of this story misspelled Scott Kessler’s last name.
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