[Financial Business World]More than 100,000 people lost their jobs. Why did the technology industry lay off workers?

[February 08, 2023]From last year to the present, the wave of layoffs in American technology companies has not stopped. It can be seen thatamazon,Microsoft,GoogleLarge-scale technology companies such as parent company Alphabet and Paypal have successively experienced waves of large-scale layoffs. So why are these tech giants cutting jobs? What impact will it have on the US economy? Does it indicate that the U.S. economy is about to decline? At the same time, the total revenue of Chinese Internet operators in 2022 will also decline for the first time since 2017. What does this mean? We will talk about these topics today.

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Big technology companies have laid off workers one after another

January 4,amazonCEO Andy Jassy said that the company will lay off 18,000 employees worldwide, further expanding the scale of layoffs than the 10,000 announced in November last year, and becoming the largest wave of layoffs in the technology industry. scale.

Salesforce, a large U.S. cloud software company, also said on the same day that it plans to lay off more than 7,000 employees, accounting for about 10% of its total employees. This is the first layoff in the company’s 23-year history.

On January 18, Microsoft announced the largest layoff in more than eight years, and it will lay off 10,000 people by the end of March. And Microsoft has carried out more than one round of layoffs last year, but did not announce how many people were fired.

January 20,GoogleParent company “Alphabet” (Alphabet) also said that it will lay off about 12,000 people, accounting for an estimated 6.4% of the total workforce.

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On February 1, PayPal, an online payment service company, also announced that it would lay off 2,000 people, equivalent to about 7% of the company’s total global workforce, becoming the latest large technology company to announce layoffs this year.

In fact, this largeLayoffs in technology companieshas been started since last year.

Facebook’s parent company, Meta, was one of the first tech giants to lay off workers. On November 9 last year, Meta announced that it would lay off 11,000 people, or almost 13% of its workforce. This is also the company’s first large-scale layoffs.

According to the latest statistics from the research platform TrueUp, large technology companies, unicorns and start-ups laid off more than 240,000 employees last year. As of February 6 this year, 379 technology companies have laid off employees, affecting more than 113,000 people, which is equivalent to more than 3,000 employees being forced to leave every day.

In addition, the “Wall Street Journal” also quoted statistics from the survey platform layoffs.fyi that since the beginning of 2022, more than 1,000 technology companies in the United States have laid off more than 150,000 employees in total, which is 10 times that of 2021, including more than 60,000 jobs. It will disappear after mid-November 2022.

Will I be deported after losing my job for 60 days?

Undoubtedly, sudden layoffs are very painful for the affected individuals and families.

A Google employee said on the Internet that when he was breastfeeding his child at 2 o’clock in the middle of the night, he received an e-mail temporarily, and only then did he know that he was fired. He felt that he was a “victim”; Email notifications, not even a chance to say goodbye to everyone.

However, for many H-1B visa holders, being fired not only means no job and income, but also more serious consequences. According to the visa regulations of the United States, if the dismissed H-1B visa holder cannot obtain a new job similar to the original job or another type of visa within 60 days, he will face the embarrassment of being deported back to his home country. Although many of them have worked in the United States for several years, have their own families, and their children were born and went to school in the United States.

Some consolation, though, is that many of those laid off were able to find jobs quickly, according to the Wall Street Journal.

According to a survey by ZipRecruiter, about 79% of recently hired employees found a new job within 3 months of being fired; Got a new job. Because they remain the most sought-after employees, with the most in-demand skills, said ZipRecruiter’s chief economist.

Why did the wave of layoffs start?

So, why are big technology companies laying off employees one after another? We see that there are both external environment influences and internal decision-making mistakes.

From the perspective of the external environment, the poor economic situation, rising energy prices, and the sharp appreciation of the US dollar are all external reasons that lead to large-scale layoffs.

For example, Intel once said that it lowered its full-year sales outlook because of high energy costs and the shock to the European economy caused by the Russia-Ukraine conflict. Separately, Alphabet, Google’s parent company, and Microsoft Corp. have said that a stronger dollar has led to lower earnings.

Since March last year, in order to curb inflation, the Federal Reserve has raised the federal funds rate eight times in a row, raising the interest rate from 0 to 0.25% to 4.25 to 4.5 percentage points, reaching the highest point in 15 years, which has had an impact on economic activities. obvious inhibitory effect.

From the perspective of internal decision-making, the large-scale layoffs are because these high-tech companies misjudged the development prospects of the industry and over-expanded during the epidemic.

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Statistics show that during the epidemic, the number of employees of Meta, the parent company of Facebook, roughly doubled to 87,000 employees. Amazon grew faster and doubled in size. At the end of 2019, Amazon had 800,000 full-time or part-time employees, and by the end of 2021, it had risen to 1.6 million.

In a letter to the dismissed employees, Meta CEO Zuckerberg admitted that overoptimism about the company’s growth prospects led to excess manpower.

There is also Twitter, after Musk’s mass layoffs, former Twitter CEO Jack. Dorsey (Jack Dorsey) also stated on Twitter that he is responsible for the situation of Twitter employees and has expanded the company’s scale too quickly.

In contrast, Apple is much conservative in terms of recruitment. During the epidemic, the number of employees only increased by about 20%. Moreover, Apple does not provide employee benefits such as free lunches like other Silicon Valley companies. Apple CEO Cook also voluntarily cut his salary by more than 40% this year. Cook also mentioned that the company is managing costs very tightly, and he sees layoffs as a last resort.

However, Apple has just announced its first quarterly revenue decline in nearly four years. The reason is that the foundry in Zhengzhou, China, was forced to shut down due to the zero-clearing policy, which seriously affected the supply and delivery of high-end iPhones.

Foreshadowing a U.S. recession?

At present, large-scale layoffs in the technology industry have attracted attention from all walks of life. So, will the tech industry’s woes quickly spread to the broader U.S. economy?

In this regard, many economists hold a negative attitude.

According to Olu Sonola, head of US regional economics at Fitch, an international credit rating agency, employment in the technology industry has increased by about 8% compared with before the epidemic, and the total employment population has just fallen to the pre-pandemic level. This suggests that the technology industry will overemploy approximately 200,000 to 300,000 jobs in 2021-2022.

In addition, there are about 5 million workers in the technology industry, accounting for only 2% of the US workforce. The impact on the labor market is much smaller than that of manufacturing, 10% of the US workforce, 10% of retail, or 11% of healthcare. From the perspective of the overall US economy, there has not been large-scale layoffs.

Economists believe that whether there are large-scale layoffs in the manufacturing industry will be a signal of recession, but so far, employment in construction and real estate remains strong, and the US job market remains tight.

The latest data released by the US Bureau of Labor Statistics on February 3 showed that the US employment data in January was unexpectedly strong. Nearly three times the value of 187,000; the unemployment rate continued to fall from 3.5% in December last year to 3.4%, a 53-year low.

As a result, some economists believe that even if the U.S. officially enters a recession, it will be a different type of recession because unemployment is low, consumers are generally in good shape and incomes are rising.

China’s Internet industry shrinks for the first time

At the same time, Chinese Internet operators are also facing a recession. Last year’s total revenue was not as good as that in 2021. This is the first decline since statistics were released in 2017.

Hong Kong’s “South China Morning Post” reported on February 4 that according to the latest data released by China’s Ministry of Industry and Information Technology, the data of Internet operators with annual revenue exceeding RMB 20 million shows that in 2022, the total revenue of China’s Internet industry will be 1.46 trillion yuan, which is higher than the previous year. A year-on-year contraction of 1.1% does not seem like a lot of decline, but this is in sharp contrast to the double-digit growth in the past six years.

Among them, Alibaba Group’s revenue in the third quarter of 2022 increased by 3%; while Tencent’s revenue shrank by 2%. This is the second time Tencent has reported quarterly revenue decline since its listing in 2004. The data also showed that Internet services such as online car-hailing, tourism, finance, and house rental were the hardest hit, with a year-on-year decrease of 17.5%.

While the revenue slowdown at Chinese internet companies was expected, the industry-wide revenue decline underscored how quickly the “high growth” scenario for China’s internet sector was ending, the report said.

Moreover, Chinese Internet companies are also laying off employees. However, unlike American technology companies, the layoffs in China’s Internet industry are due to the dynamic reset by the Chinese Communist Party and the industry’s regulatory policies, which have weakened Internet giants such as Alibaba and Tencent. development momentum.

Looking forward to the future, Chinese Internet companies, on the one hand, have no financial support, on the other hand, they are subject to strict supervision and policy changes by the CCP government, and the demographic dividend is disappearing at an accelerated rate. The combination of these factors will damage the prospects. more worrying. If the layoffs of U.S. technology companies may be temporary and have limited impact on the U.S. economy, then the shrinking of China’s Internet technology industry may be more permanent.

Institute of Finance, Commerce and Economics
Planning: Yu Wenming
Written by: Li Songyun
Editors: Wei Ran, Yu Wenming
Edit: Quge
Producer: Li Songyun
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Editor in charge: Lian Shuhua