Why Widespread Tech Layoffs Keep Happening Despite A Strong U.S. Economy

Unknown: Hello, Bernie. Hello. Thank you for meeting with me. And Rosie. We have an important meeting today. We completed our 2023 performance reviews. This is where you have not met Cloudflare's performance expectations. We have decided to part ways with you. Yes, I'll stop right there. This is a viral video posted by Brittany Pietsch, a former employee of CloudFlare, a

tech

nology company based in San Francisco. The video was posted in January 2024 and received so much attention that it may have started a new subgenre of viral videos showing this person being fired in real time. The

tech

nology industry is once again suffering

widespread

layoffs

after in 2023, LinkedIn just laid off almost 700 employees.

Qualcomm plans to eliminate more than 1,200 jobs. Google, Amazon and Snap are among the companies that will continue to downsize in early 2024. It looks no different as layoff announcements, especially in the tech industry, continue to make headlines. Affected units also include hardware engineering and advertising sales So far last night, CEO Sundar Pichai told his workforce to expect more cuts Kate Rooney: and Amazon spokesperson confirmed those

layoffs

ahead of Prime and Prime Video and MGM He said in that memo that the company was making some of the cuts to prioritize long-term investments. Unknown layoffs are also affecting industries like healthcare, banking, and media, whatever the tech industry has been dominating the headlines.

This Devyn Rafols-Nunez: layoffs and everything that's happened in tech, I think is pretty revealing. You know, you can have your dream job, you can have your Oh, my dream is to work for Microsoft or my dream is to work for AWS. And you get there and you realize, hey, okay, it's like any other job. It's a great place to be. There are a lot of great perks, but at the end of the day, you can get rid of yourself like this Unknown: Layoffs through early 2024 indicate a dramatic shift in the tech industry, we're going to continue to see layoffs happen as the future of work has changed as that has changed the future of technology.

And as investors, the appetite for risk and growth versus profitability has also changed dramatically. So why are Big Tech and other industries laying off tens of thousands of workers at a time when the U.S.

economy

looks

strong

on paper? The start of the Covid 19 pandemic was a disastrous economic event, at least at the beginning. However, the tech industry boomed in 2020, with the top seven tech companies adding $3.4 trillion in value. Emergency measures by the feds to boost the pandemic-hit

economy

, such as cutting interest rates to near zero, helped boost tech stocks. This measure helped the technology industry expand and there was a wave of hiring while people were confined at home.

Amazon added the most employees during this golden period, peaking at 1.6 million employees in 2021. If we go back before the layoffs, all the tech companies were really putting an emphasis on growth. And so capital was really cheap, you know, so you could get loans, you could get money, and access to capital was really affordable. And then you see that interest rates went up and you begin to see that this growth in the workforce did not translate into growth and profitability. And access to capital became a little more restricted; Many companies were seen starting to press the panic button.

And then we saw how these thousands and thousands of people were laid off all at once. And that was pretty surprising: 80% of Twitter left or abandoned it or got kicked out, fired whatever you want to call it. And yet the website continues to function. Do you think people look at Elon Musk and think, You know what, we really need all these people? I give credit to Elon Musk for starting and making Twitter acceptable, but many large companies decided to become agile and efficient. And you know, this is where you start to see the incredible influence of what these tech platforms really have, which is that they didn't need those people, right?

They were hoarding the talent. It was an option and it was cheap for them. Yes, I asked all the tech CEOs: are they inspired by what Elon does? And will they say it in the minutes? No we don't, we would never want to do that. But, you know, in the group chats, everyone's like, wow, that was an awesome move. The artificial intelligence hype of 2023 is starting to have real-world effects; By 2024, top tech CEOs are doubling down on AI investments. In January 2024, Meta CEO Mark Zuckerberg announced his plans to build an artificial general intelligence known as AGI Everyone.

Today I'm bringing Meta's AI research efforts closer to supporting our long-term goals. Develop general intelligence, open it responsibly and make it available and useful to everyone in our daily lives. All this investment in creating AI jobs, but in the end spending on others, the recent report in fact shows that the number of jobs containing Gen AI terms has been increasing. So there's about a 500% increase in the number of jobs that mention generative AI, there's about a 6,000% increase in demand for these jobs from job seekers. But I think there's still a mismatch going the other way, and as the total amount of demand for AI talent far outstrips the number of AI professionals, every company in every industry is trying to figure out how to use AI in everything. what they do. .

I mean, AI will also create many more jobs. But at the same time I would say that there will be jobs that will be automated. So, AI has already impacted the business effectively. Oh, absolutely. Absolutely. Especially in the technology sector. I mean, they've been talking about it for years. Now, the fact that there are more companies moving towards artificial intelligence and they are considering the fact that instead of paying someone $200,300,000 a year to do the job, I can use artificial intelligence to do the job that they they used. Being able to do this AI thing is real and it's not going away, and they can't have people holding them back.

And so what they've been doing for the last year is finding places within the organization that they can cut back to be able to get to a place where they can ship faster, eliminate managers and then eliminate engineers who are trained for a previous generation of technology, they are also leaving to make room for people more capable of artificial intelligence, AI is definitely playing a role in the layoffs we are seeing. Automation has increased efficiency for some of the workers who can use AI to make marketing decisions and analyze data to serve customers more efficiently and effectively.

So AI is a paradigm shift that is changing the way people work and the priorities of technology companies. Right now, I don't see AI having a big impact on these tech layoffs. Some companies may have cited that they are trying to shift priorities and are letting some employees focus more energy on some of these generative AI tools. But I think it's important to say that, that's very different than saying that companies, well, we can let people go now because, you know, AI in general and all these tools are taking away jobs. The tech industry used to have that shiny image of having big salaries and unlimited benefits.

But recent stories of tech layoffs have completely shattered that image. Devyn Rafols-Nunez: I really don't regret publishing it or what happened. I think the bigger picture is that I've been able to be a voice for people who have been through something similar. You know, the stories I've gotten are from people who were laid off 2030 years ago, and they still remember to this day how that made them feel and it didn't make them feel good. And I think we should shed light on things like that. Then we can make a change; otherwise nothing will change. In Unknown: My experience, publicly sharing things like being fired, I think, is partly due to the fact of the rise of social media like tick tock, even YouTube shorts, people are becoming a lot more comfortable sharing their experiences.

And many times, when layoffs happen, people feel embarrassed about being fired. However, in reality, many times, if someone is fired, it is due to a lack of leadership in that company. Tech companies that carried out

widespread

layoffs have seen a rebound in their stocks. The tech-heavy NASDAQ rose to 43% in 2023. Its best year since 2020. Meta was the biggest gainer among big tech, up more than 194%. The rise of tech stocks is also helping to boost the wealth of tech billionaires: Super-rich CEOs saw their wealth grow by 48%, or $658 billion in 2023. Let's be tough, especially for a company like Google, which in the last 25 years has not been. through a time like this.

But you know, we've always cared deeply about our employees. We also see the sign of a negative development which in a certain sense is a sign of a positive development of greater demand for services and improvements in automation and activity. We now see that the stock market reacted quite favorably to this round of layoffs. We see these record stock prices of many of these technology companies. And so the share price that investors really favored profitability, really favored this difficult year that these technology companies had. And so instead of rewarding the growth that we saw in all of them years ago, they're now rewarding profits.

And so the layoffs have continued. People have gotten used to them and, unfortunately and sadly, it seems that layoffs are going to be the new normal. The data suggests an influx of layoffs in the tech industry, starting in the second half of two years. At 22 and peaking in 2023, some non-tech sectors are also experiencing widespread layoffs. A good example is the messaging giant that raised eyebrows by announcing 12,000 job cuts in January. The media industry is not immune to layoffs either. And from 2023 the industry will see more than 20,000 jobs cut in 2024. It looks no different, as big names like Paramount NBC Sports Illustrated and the Los Angeles Times have announced major job cuts in early 2024.

The banking sector is not shying away either. cut jobs, Citigroup. , Morgan Stanley Deutsche Bank or some of the big names that have already announced their layoff plans for 2024. It is worth noting that although these mass layoffs continue to dominate the headlines, labor markets still appear

strong

. The U.S. economy added 353,000 jobs in January, much better than the Dow Jones estimate of 185,000 jobs. But the unemployment rate remained at 3.7%. Against forecasts of 3.8%. Experts are divided on whether recent tech layoffs would extend to non-tech sectors. If we look at the current job market right now, there's no evidence that we're going to see any trickle down, obviously, you know, the jury is still out.

Is very soon to know it. But it's interesting if we look back, and 2023 was a year of many layoffs in the tech industry. And we didn't see any of that leak out. Even within the technology industry, which is usually the government, it is usually defined as the information sector. We didn't see a very high layoff rate. Then we saw many companies announcing layoffs. But those companies had a huge proportion of the media, because once we boiled it all down, maybe about 1% of employment was being laid off. So ultimately, the overall rate of people losing jobs due to layoffs remains near historic lows.

It hasn't reached the rest of the economy yet, as we're seeing really high stock prices and pretty low unemployment. But at some point, if this continues, both companies and individuals will have to cut spending, and that has consequences that go far beyond the tech industry.