The wave of tens of thousands of layoffs at big tech companies is largely a miscalculation. The same companies that are now announcing the layoffs of their employees with messages of regret have been hiring at an unprecedented rate in recent years. Only Amazon, Alphabet (Google), Microsoft, Meta and Apple – the Big Tech, the five technological giants – have added a million people to their payrolls in the last three years. Now they have announced the layoff of more than 50,000 workers. The only one who hasn’t joined the tsunami of cuts – for now – is Apple.
“We are hiring for a different economic reality than the one we face today,” confirmed Sundar Pichai, Google’s CEO, in his message to the workforce, announcing 12,000 job cuts. It is true that the economic situation has deteriorated, but the job market in the United States is more dynamic than ever, with an unemployment rate of 3.5%, the lowest in the last 50 years.
Where the “economic reality” has changed the most is the strong demand for products and services from tech companies that has accompanied the pandemic, lockdown, changing consumer habits and widespread teleworking, has receded as the return to normal has progressed . Technology companies are finding sales that aren’t growing as fast as they expected, and costs that have been. At some of these giants, profits began to fall sharply.
The battle for engineers, technicians and programmers in Silicon Valley also caused salaries to explode. For those who remain unemployed with these or other profiles (human resources, marketing …), the problem is that all companies are laying off at the same time.
Each company’s case is different, but the common denominator is an unprecedented increase in staff in recent years, as evidenced by the figures used by EL PAÍS in its annual and quarterly reports. In five years, the five tech giants have grown from 926,000 employees in 2017 to more than two million in 2022, without any of them releasing their exact year-end numbers.
The Amazon Factor
The sum is very much influenced by the expansion of Amazon, whose employment profile, in turn, differs greatly from the others. In 2017 it had 566,000 workers; 798,000 in late 2019, just before the pandemic; and closed 2021 with 1,608,000 employees. The latest figure released by the company is 1,544,000 workers as of September 30, 2022, but this still represents an increase of 76,000 jobs from a year ago given the company’s seasonal nature. The 18,000 layoffs represent just over 1% of the workforce, although they represent the largest workforce reductions in the history of companies in the industry.
The case of the company founded by Jeff Bezos is peculiar because Amazon has undertaken a major international expansion and because most of its employees are not technicians but logisticians. But hiring fever has also hit the rest of Big Tech.
Meta broke the fire of massive layoffs by announcing 11,000 job cuts. But the company that Mark Zuckerberg founded and runs increased its payroll from 25,000 employees in 2017 to 87,314 in the third quarter of last year. In the last three years, the company has practically doubled the number of 45,000 employees who were involved in the pandemic.
Alphabet, the Google company, has more than doubled its workforce in the past five years, from 88,000 employees in 2017 to 186,779 as of September 30. Hiring had also accelerated during the pandemic as the company added 68,000 jobs since the end of 2019. Now the company has announced 12,000 layoffs, which is 6% of its workforce.
Microsoft has also increased its payroll by 77,000 in three years and by 97,000 since 2017 to the 221,000 employees it ended its most recent fiscal quarter with. The company that Satya Nadella runs has announced it will cut 10,000 jobs, 5% of its workforce.
Apple is the only one of the Big Five tech giants that hasn’t announced any mass layoffs. It has reined in hiring (and fired recruiters) and made some minor adjustments, but for now it has been sidelined by record cuts from the other four groups. Tim Cook’s group was the most reluctant to hire. The workforce has grown by 27,000 over the past three years to the 164,000 that ended fiscal 2022. While that’s a not inconsiderable 20% gain, it’s a far cry from Microsoft’s 53%, Alphabet’s 57%, Meta’s 84%, or Amazon’s more than 100%. The five big tech companies have almost doubled their workforce in three years. A small portion of this increase comes from acquisitions of other companies.
“I was wrong”
The top executives of the tech giants have admitted that this acceleration in hiring, mixed with a change in economic trends and a slowdown in demand for their services, has stifled them. “This year’s review has been more difficult given the uncertainty of the economy and the fact that we’ve been hiring rapidly for the past few years,” the message began, with Amazon CEO Andy Jassy announcing the job cuts. “Just as we’ve seen customers accelerate their digital spend during the pandemic, we’re now seeing them streamlining their digital spend to do more with less,” admitted Microsoft’s Satya Nadella.
Mark Zuckerberg was the one to pitch a more full mea culpa: “In the early days of Covid, the rise of e-commerce led to tremendous sales growth. Many people predicted that this permanent acceleration would continue even after the pandemic ended. So did I, so I made the decision to significantly increase our investments. Unfortunately, that didn’t go as expected,” said the founder and managing director of Meta in his message to the workforce. “I was wrong and I take responsibility for that,” he added.
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