Facebook’s parent company Meta’s announcement on Wednesday of plans to cut its workforce by 11,000 is just the latest in a wave of tech employment unrest that is simmering even as the the US labor market as a whole continues to turn red.
The move comes less than a week after new Twitter owner Elon Musk kicked out about 3,700 of the platform’s 7,500 employees in the name of cost savings. Also last week, ride-sharing startup Lyft announced plans to cut its workforce by 13%, or about 700 employees. And online giant Amazon issued a notice last Wednesday saying it was instituting a company-wide hiring freeze “with the economy in an uncertain place and in light of the number of people we have hired. during the last years”.
So what’s the problem ?
Pandemic-imposed restrictions on in-person transactions and enforced home isolations have resulted in huge growth among a wide range of online goods and service providers. So they hired like crazy to keep up with the new business. But now, the slowing economy and the collective return (more or less) of consumers to pre-pandemic consumption habits are forcing tech companies to adapt to new realities.
Tech layoffs amid robust job market
Tech companies make up a relatively small share of the overall U.S. labor market, which added 261,000 jobs in October, according to the latest Labor Department report. And while employment dynamics are still very lopsided, with nearly two job openings for every available worker, the thirst for additional labor is waning. Job gains in October beat most economists’ expectations, but were still down from September’s 315,000 new hires. And, a Labor Department report last Tuesday pegged unfilled jobs at 10.7 million in September, down from an all-time high of 11.9 million in March.
Many tech companies continued to hire frantically in 2020 and 2021 in an attempt to keep pace with growing consumer demand. A shining example is exercise bike innovator Peloton, which for a time couldn’t build enough bikes to keep pace with work-from-home customers who were looking for exercise bike alternatives. internal. The company’s workforce peaked at 4,000 amid the rush, but interest has dwindled significantly as COVID-19 restrictions eased and Peloton has since halved its employee headcount, so far , and has executed four rounds of layoffs this year.
“The pandemic has created very unique conditions, unique across many different industries, that have caused a dramatic reallocation of capital,” Julia Pollak, chief economist at recruiting site ZipRecruiter, told CNBC. “A lot of those conditions no longer apply, so you’re seeing a reallocation of capital towards more normal patterns.”
Facebook cuts budgets, benefits, workers
As retailers, and especially e-commerce sellers, pull back on marketing and advertising budgets amid slowing consumer spending from pandemic highs, ad-dependent businesses are feeling the pinch first.
Meta/Facebook’s revenue is dominated by advertising dollars, and the company saw its first quarterly revenue decline in its history this summer, followed by even worse declines in its fall financial reports, according to The Associated Press.
Facebook founder and Meta CEO Mark Zuckerberg wrote in a letter to employees on Wednesday that declining revenue growth was a driver of the decision to lay off employees.
“We’ve reduced costs across our business, including cutting budgets, cutting benefits, and reducing our real estate footprint,” Zuckerberg wrote. “We are restructuring the teams to be more efficient. But these measures alone will not bring our spending in line with our revenue growth, so I also made the difficult decision to let people go.
Zuckerberg also acknowledged that he was mistaken in anticipating that the pandemic-induced surge in e-commerce would be “a permanent acceleration.”
“Unfortunately, it didn’t turn out the way I expected,” Zuckerberg wrote. “Not only has e-commerce returned to earlier trends, but the macroeconomic slowdown, increased competition and loss of advertising signal has caused our revenue to decline from what I expected.”
Musk also cited falling advertising revenue from Twitter as the motivation for his decision to cut staff at the San Francisco-based social media platform.
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