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The huge list of major IT businesses that have announced layoffs speaks volumes about the state of the economy, but it may also reveal much more about the future of the industry. For growth, investors will have to seek elsewhere.
The parent company of Facebook, Meta Platforms, stated Wednesday that it will eliminate more than 11,000 positions, or 13% of its workforce, in the first significant layoffs in the 18-year history of the business. This week, the business software provider Salesforce also started dismissing some staff members. Elon Musk reduced Twitter’s employment by around 50% last week as one of his first moves after purchasing the business; he also made similar reductions at Lyft, Stripe, and iBuyer Opendoor Technologies.
These follow a dizzying list of previous announcements from Netflix, Shopify, Tesla, Snap, Compass, Peloton, Twilio and more. Meanwhile, Amazon.com announced a corporate hiring freeze for several months, and Alphabet’s Google asked some employees to apply for new jobs in order to stay with the company.
Overall, what stands out about these moves is that the US job market remains in very good shape. The economy added 261,000 jobs last month, with fewer people filing new unemployment claims each week and job openings remain high. Tech layoffs make headlines, but in the context of a strong US labor market of 153 million people, they are just rounding errors.
The social media sector has been particularly hard hit, with Apple’s requirement that users agree to have their devices tracked, impeding his platform’s ability to sell targeted advertising online. And of course, with the economy slowing down so much, some might argue that tech layoffs are just canaries (or what Twitter birds should be) in the economy’s coal mines.
But they affect a company that until recently was the most valuable company in the world. The boom in online business caused by the Covid crisis has led many companies to deduce strong growth paths and increase staff accordingly. He seemed to be praising the future. Meta CEO Mark Zuckerberg, in a message to employees Wednesday, admitted he was among those who believe there will be a “sustained acceleration that will continue even after the pandemic has passed.”
But one of the things that made the fast-growing tech company attractive to investors was his ability to navigate business cycles. Google and Amazon hired more and more workers as the United States lost 8.6 million jobs in 2008-09. When companies are hit by economic cycles instead, they look like old companies that were meant to be destroyed.
Tech’s newest roster of Superstars isn’t blind to this terrifying transformation. Meta was desperate to change its brand name in the eyes of its investors, so it changed its name from Facebook to reflect the “Metaverse” product before it existed.