By Jeremy C. Owens
Companies like Google and Microsoft are laying off thousands of workers -- but that is a small percentage of the workers those companies hired during the pandemic
Alphabet Inc. announced 12,000 layoffs Friday morning, which will revert Google's workforce to the size it was ... sometime in the second half of last year.
While 12,000 is a lot of workers losing their jobs, it is still less than the net number of hires Alphabet (GOOGL)(GOOGL)made in just the third quarter of last year, which totaled 12,765. This is just one example of why the layoffs announced in recent weeks by Big Tech companies, although together totaling huge numbers, are unlikely to cause similarly huge issues at those companies or in the larger economy.
"When people hear layoffs, that is a highly charged word. It triggers emotions. But you have to understand this in the broader context, which is there was explosive growth during the pandemic, and all that growth was unexpected," Russell Hancock, chief executive of Joint Venture Silicon Valley, said in a telephone interview Friday. "Because of that growth, a lot of folks thought, 'This is the new normal,' and they made decisions on that basis. Then we lived for a few more months and became more wise ... and they're making adjustments."
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Those adjustments look large in terms of the number of layoffs but not in comparison with the number of people hired during the COVID-19 pandemic. The largest number announced by a Big Tech company so far is the 18,000 projected layoffs at Amazon.com Inc. (AMZN) -- but Amazon hired hundreds of thousands of workers during the pandemic to grow into the second-largest employer in the U.S. The e-commerce and cloud-computing company had fewer than 800,000 employees at the end of 2019, but that number doubled to more than 1.6 million at times last year.
Microsoft Corp. (MSFT) grew its workforce more than 50% from mid-2019 to mid-2022, hiring roughly 77,000 workers; it recently announced 10,000 layoffs. Facebook's parent company, Meta Platforms Inc. (META), nearly doubled its head count from roughly 45,000 at the end of 2019 to more than 87,000 at the end of the third quarter of 2022, then decided to cut about 11,000 workers.
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Big Tech companies that did not accelerate their hiring during the pandemic are not planning similar layoffs -- not yet, anyway. For example, Apple Inc. (AAPL), which increased its head count by less than 20% from the end of its 2019 fiscal year to the end of its 2022 fiscal year, has not announced any substantial layoffs.
The real question is whether there are jobs out there for the laid-off tech workers, and the answer so far appears to be that there are. Job postings have stayed strong, according to the Job Openings and Labor Turnover Survey, and unemployment remains at a multidecade low. Tech jobs have been increasing, even as job postings in the industry have declined from record levels.
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Venture capital has also continued to fund young tech companies that will be in need of experienced workers. EY reported that 2022 was the second-biggest year for venture-capital investment on record, with more than $200 billion pushed toward young companies, behind only 2021. Several Silicon Valley startups told MarketWatch reporter Jon Swartz that they are hiring, and venture-capital investors say they will be looking to invest in young startups amid any economic downturn, which they see as an opportunity to build.
Established tech companies are also still hiring. At Davos in recent days, the chief executives of Palantir Technologies Inc(PLTR) and Workday Inc(WDAY) said they expect to hire more employees this year, even as enterprise-software stocks take a beating.
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There certainly could be more widespread pain if large-scale layoffs continue, but the announcements so far and the effects on the larger economy that have been observed do not indicate that a wide downturn is on the way yet.
"I don't see any signs of a bust. I don't see any signs of even a downturn or, heaven forbid, a recession" in Silicon Valley, said Hancock, a view he called "informed speculation." He added: "I see companies making adjustments, and they're marginal adjustments, to the global workforce."
Those adjustments affect real people, some of whom could lose the ability to stay in the U.S. if they cannot find another job within a short period of time. "The people who were laid off, those are very real disruptions, their life has been massively disrupted and they're going to go through a period of pain and upheaval," Hancock said.
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For the rest of us, though, the economic effects appear minimal so far. As annual forecasts appear in the coming days along with holiday-season returns, we should get a clearer picture of just how concerned we ought to be.
-Jeremy C. Owens
(END) Dow Jones Newswires
January 23, 2023 08:22 ET (13:22 GMT)
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