What has led to an increase in layoffs?
Significant job losses in the tech sector first began trending at the beginning of the coronavirus pandemic, when almost 70,000 employees at tech startups lost their jobs in the first and second quarters of 2020. This was due, in part, to lockdowns and mobility restrictions that forced companies to reduce costs. At that time, tech startups in sectors such as transportation, finance, and travel were the most affected. By the second half of 2020 through to end-2021, job losses at tech startups noticeably decreased as venture capital spending rose at internet, technology, mobile and telecoms, and software companies, among others.However, in the second quarter of 2022, the wave of tech startup layoffs re-emerged amid changing consumer preferences, global economic disruptions, and a turbulent stock market. Indeed, these disruptions led to plummeting company valuations, slow revenue growth, and cost-cutting measures to reduce operating expenses, with startups in the tech sector noting the difficulty of raising new funding.
Notable examples
As of December 2022, tech firms such as Meta, Amazon, Twitter, Uber, and Netflix had trimmed their headcount, citing multiple reasons including the pandemic, over hiring and restructuring due to rapid growth, and economic uncertainties facing firms in 2023 ahead of a looming recession. In November 2022, Twitter, for example, laid off 3,700 employees - around 50 percent of its total workforce - in a move to revamp teams and change the company’s business model following its acquisition by Elon Musk.Meanwhile, Meta, which owns Facebook, Instagram, and WhatsApp, announced on Nov 9 that it would lay off 11,000 employees, representing 13 percent of its workforce, amid revenue declines and a plunging share price. Meta’s cuts are the largest of any company in the tech industry since the start of the pandemic. Mark Zuckerberg, Meta’s CEO, blamed the “macroeconomic downturn” and “increased competition” in addition to unrealistic growth forecasts based on the company’s high revenue performance during the pandemic.
What is the forecast for 2023?
Looking ahead, with the IMF projecting more than a third of the global economy to contract in 2022 or 2023, layoffs are likely to continue at some tech startups for the time being. That being said, the longer-term outlook for tech industry employment looks promising: by 2032, U.S. tech employment, for example, is forecast to expand from 5.4 million people to more than six million.
