Shortly before Thanksgiving, Amazon CEO Andy Jassy confirmed rumors that layoffs had begun across multiple departments at the e-commerce giant and said he would review staffing needs in the new year.
On Wednesday, Jassy provided a sobering update to that outlook: Amazon is cutting more than 18,000 jobs, more than double the 10,000 previously reported and marking the highest absolute layoffs of any tech company in the recent recession .
At Amazon and other tech companies, the second half of last year was marked by job freezes, layoffs and other cost-cutting measures at a number of Silicon Valley household names. But if 2022 was the year the good times ended for these tech companies, 2023 is already shaping up to be the year the people at those companies wonder how bad things can get.
That same day, Amazon announced layoffs, cloud computing company Salesforce said it was laying off about 10% of its workforce — easily equating to thousands of workers — and video-sharing outlet Vimeo said it was cutting 11% of its workforce. The next day, digital fashion platform Stitch Fix said it plans to cut 20% of its salaried workforce, after cutting 15% of its salaried workforce last year.
The ongoing downturn in the industry comes as tech firms contend with a storm of seemingly perfect factors. Many companies have been aggressively hiring after seeing an increase in demand for digital services amid the onset of the pandemic. Demand then increased as Covid-19 restrictions eased and people returned to their offline lives. Rising interest rates have also dried up the easy money tech companies rely on to make big bets on future innovation, cutting into their lofty valuations.
Recession fears and economic uncertainties still weigh on the minds of consumers and policymakers heading into 2023, and interest rate hikes are expected to continue. In addition, the increase in layoffs could give some tech companies some cover to take more drastic steps to cut costs than they would otherwise.
While there have been some recent layoffs in the consumer goods sector and signs of more elsewhere, the situation in Silicon Valley remains starkly different from the economy as a whole.
The latest employment report from the Labor Department on Friday pointed to a year of unusual job growth in 2022, marking the second-best year on record for the labor market going back to 1939. found Tech job cuts in 2022 are up 649% from the previous year, compared to just a 13% increase in job cuts in the overall economy over the same period.
In a memo to employees this month, Jassy attributed the need for significant cost reductions at Amazon to “an uncertain economy and the rapid hiring we’ve done over the last few years.” Others in the industry echoed these points with varying degrees of atonement.
In a series of apologies that are starting to sound the same, Silicon Valley business leaders, from Meta to Mark Zuckerberg to Salesforce to Marc Benioff, have blamed the wave of job cuts on a misreading of how pandemic-induced demand for tech products would play out.
Benioff began last week by invoking the Hawaiian word for family, as he often does, to Salesforce employees. “As an Ohana,” he wrote, “we have never been so mission critical to our customers.” But the economic environment was “difficult,” Benioff wrote. “With this in mind, we have made the very difficult decision to reduce our workforce by approximately 10 percent, mostly over the coming weeks.”
“As our revenues accelerated through the pandemic, we hired a lot of people that led to this economic downturn that we’re facing now, and I’m responsible for that,” Benioff said. Like other tech leaders, it’s unclear whether Benioff will have any repercussions for his title or compensation.
Patricia Campos-Medina, executive director of the Labor Institute at Cornell University’s School of Industrial and Labor Relations, criticized miscalculations of this magnitude as “an empty apology” to workers who are now paying.
While there’s a lot of near-term uncertainty for these tech workers, as well as “a big economic blow to their lives,” Campos-Medina added, “I think it’s a very skilled workforce that will find a way to get back into the economy.” ” He predicts that many of the laid-off tech workers will be able to find work and “we will see more stability in the medium to long term.”
But the end may not yet be in sight. Dan Ives, Wedbush Securities analyst he said Last week’s layoffs at Salesforce and Amazon “add to a trend we expect to continue into 2023 as the tech sector adjusts to a softer demand environment.” He added that the industry is now “forced to cut costs after spending like the Rock Stars of the 1980s”.
Despite a strong overall labor market, there are growing concerns that tech layoffs could spill over.
“I think we’re seeing an inflection point; job growth is slowing, and a lot of these tech cuts that we’re hearing about will start to materialize in the broader economy, I think, by the end of the first quarter,” said John Leer, chief economist at Morning Consult. CNN senior business correspondent Christine Romans in an interview Friday.
In that sense, at least, Silicon Valley may be ahead of the curve again, but not in the way it wants to be.