5 takeaways from the massive layoffs hitting Big Tech right now
AYESHA RASCOE, HOST:
Two hundred thousand - that's how many tech jobs have been cut since the start of last year. It's one of Silicon Valley's biggest downturns ever, and most analysts say more pain for the industry is likely. NPR tech reporter Bobby Allyn joins us to discuss what exactly is going on in the tech world and what it could mean for the rest of the economy. Good morning.
BOBBY ALLYN, BYLINE: Good morning.
RASCOE: So what's driving these big cuts?
ALLYN: So there's a few things going on here. First, let's step back and remember what happened for the tech industry during the pandemic, right? Everyone moved more of their lives online. We are all doing more online shopping. We are all working from home. Lots of people got into things like crypto. And it just made demand spike for tech companies. And to keep up, tech companies went on a hiring blitz - and I mean a real hiring blitz. Facebook parent company Meta and Amazon doubled their workforces. Microsoft and Google upped their staffers by 50%. It was really pretty wild to watch. But now people are spending less money. Inflation is high. Of course, there are recession fears around the corner. And tech executives are saying, you know what? Maybe we just got a little too excited during the pandemic, and now we just have to let thousands of people go.
RASCOE: These are some of the biggest and most profitable companies in the world, though. Is Big Tech really hurting?
ALLYN: In relative terms, yes. Big Tech's stocks have taken a beating lately. They lost a lot of value. Shareholders certainly are not happy. So experts say these mass layoffs are sending a direct message to these investors. Here's Sam Abuelsamid. He's an analyst with Guidehouse Insights.
SAM ABUELSAMID: What they're saying is, look, we are being prudent. We want to get back on a growth path, and we don't want to continue to spend money needlessly. That said, when you're still as profitable as these companies are, saying that you're spending money needlessly, you know, seems like a little bit of a specious argument.
RASCOE: He doesn't seem completely convinced by this. Like, so what does he mean by that?
ALLYN: Yeah, he basically means that these tech companies would be just fine had they not made these mass layoffs. Let's take Microsoft as an example. It laid off 10,000 of its workers last week. But in its last financial quarter, it made $16 billion in profit, right? And it also offered $69 billion in cash last year to try to acquire the video game company Activision Blizzard. So these companies are sitting on mountains of cash. They're reaping huge profits, but they do also have investors they have to appease. It's worth noting, too, that, you know, the downturn is not just affecting Big Tech. Many smaller tech companies, like Yelp and Instacart, had to lay off people, and hundreds of tech startups and fintech, crypto, e-commerce and other industries that launched with loads of easy money saw that cash dry up, and now they have to cut staff.
RASCOE: Is there anything these tech layoffs can tell us about the economy overall and whether we really are heading into a recession?
ALLYN: That is the question, Ayesha. Everyone's wondering that now, but it's hard to answer. I can note a few things, though. Recent surveys show most laid-off tech workers find new tech jobs pretty quickly, so their prospects are looking OK. And the overhiring in Big Tech really was a tech-specific phenomenon. So analyst Abuelsamid says we shouldn't read too much into that.
ABUELSAMID: I'm not sure that it necessarily means a whole lot for the mainstream economy. Broadly, across the economy, we're still suffering from a lot of labor shortages.
ALLYN: And he points out that macro factors, like high inflation and a pullback in how companies are spending right now, are factors that are affecting every corner of the economy. So, you know, while the shake-up in Big Tech right now might be dramatic, he says it doesn't necessarily mean it's what's coming for the rest of the economy. But I guess we'll just have to see.
RASCOE: NPR's tech reporter Bobby Allyn. Bobby, thank you so much.
ALLYN: Thank you, Ayesha.
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