Big Tech Layoffs ahead of Recession

[audreyh1]

I remember J Powell mentioning in his last press conference that the large tech layoffs were their own unique situation and didn’t necessarily reflect the larger economy where the labor market was extremely tight and companies were unwilling to let go of workers that where hard to hire in the first place.

I read this interesting article recently on CNBC app, found another version to link. It was basically comparing Apple to the other tech giants. Apparently Alphabet, Amazon, Meta, Microsoft etc. ramped up hiring strongly in 2020 and 2021, whereas Apple pretty much stayed on the same hiring track. So these other tech giants are unwinding excess hiring. They’ve certainly made a lot of noise about layoffs in anticipation of a recession.

On January 18, Microsoft announced it will lay off 10,000 employees, reducing its workforce by 5 percent, and Amazon began conducting layoffs that will eventually slash over 17,000 jobs.

Microsoft and Amazon are joining tech industry peers including Alphabet and Meta which have also cut staff in recent months.

Most companies going through layoffs are blaming macroeconomic conditions and the possibility of a future recession for their belt-tightening. However, one factor that has gone underappreciated is how quickly tech companies were hiring during their expansion phases.

Apple, on the other hand, is an exception. Over the past two years, it has not increased its hiring rate and has not announced any layoffs.

https://www.moneycontrol.com/news/b...asnt-announced-layoffs-heres-why-9905861.html

 

[Freedom56]

During the pandemic, the tech industry hired just about anyone with a pulse. They severely lowered their hiring standards. They no longer required university degrees for engineering positions. Now they are dealing with the consequences of those decisions.

 

[Montecfo]

Yes it is interesting. It appears the tech giants have a good bit more cutting to do than what has been announced, just by looking at their ramp-ups.

 

[JoeWras]

Having had a career in tech, I've seen this play out a few times.

Last year young tech workers were shoving it in our face (high wages, quiet quitting, playing at work, whatever). That rang a bell, I was once that guy. My Megacorp had the toys too during the good old days of 1999. Anyone remember sleeping pods?

Then one day, it is gone. It was like falling off a cliff.

Those of us who dared to warn our young friends were scoffed at with ageism glee. To that I thought, "Oh well, I guess everyone has to learn."

And so they will.

 

[jebmke]

In addition to clearing out the excess from pandemic they have taken note of the fact that Twitter continues to run (albeit shaky, perhaps) with massively fewer employees so these other cuts are not likely to have an impact on their business. They were probably always over-staffed, even prior to the pandemic.

 

[MichaelB]

I had the impression the layoffs were a sign the big tech companies were reducing their product development efforts, not their core business. Even pre-pandemic there has been too much money invested in tech that shows little promise of generating cash flow or profits anytime soon.

 

[matjung]

This is not related with recessions.
When there is no Hiring strategy, there is also no Firing strategy.
The CFO finds out, we are running out of money, then roles are getting axed.
Also you read in the News that others are also firing guys.

With the next round of Cash/Innovation another round of hiring takes place.
It may impact Stock and Car markets.
When you get sacked, you may not buy a Tesla in the following week.
Some do, now they have time for a road trip from east to west.
Above average earners can do without a job for a couple of quarters if not years.
I would worry when Starbucks, Burger King or Walmart fires people.
I think the American way of getting Hired and Fired is better than if you don't get hired in the first place (happens in some European Economies)

 

[Aerides]

Tech layoffs don't necessarily precede a recession. I don't see that they have to be related. Tech has always had its own ups and downs, as the pendulum always seems to swing too far each way, every time, time and again.

And the numbers of these layoffs won't really impact the overall unemployment stats. Many of them will be Visa workers who will either quickly find new roles/sponsorship, or leave the country. Others will also find soft landings, join startups.

Sounds more like most of them are correcting to new forecasting.

 

[JoeWras]

I had the impression the layoffs were a sign the big tech companies were reducing their product development efforts, not their core business. Even pre-pandemic there has been too much money invested in tech that shows little promise of generating cash flow or profits anytime soon.

Yes.

They are especially biting the bullet on marginal products that have lasted too long. That's what happened at my Megacorps. It is really, really tough to be on a team that drew the short card when this happens.

Amazon is jettisoning a lot. They cancelled "Glow". They are ramping down Alexa/Echo devices and especially services. The future there is unknown. Those are just some examples.

 

[audreyh1]

Tech layoffs don't necessarily precede a recession. I don't see that they have to be related. Tech has always had its own ups and downs, as the pendulum always seems to swing too far each way, every time, time and again.

And the numbers of these layoffs won't really impact the overall unemployment stats. Many of them will be Visa workers who will either quickly find new roles/sponsorship, or leave the country. Others will also find soft landings, join startups.

Sounds more like most of them are correcting to new forecasting.

I’m sure the much anticipated recession is more of a generic excuse, as well as an attempt to increase stock prices by projecting cost cutting measures. Up to the end of 2021 tech stocks were flying high.

 

[Vincenzo Corleone]

I'll bet dollars to donuts that these same tech companies will continue spending big $ lobbying congress to increase work visas with their bogus worker shortage claim.

 

[GravitySucks]

Tech layoffs don't necessarily precede a recession. I don't see that they have to be related. Tech has always had its own ups and downs, as the pendulum always seems to swing too far each way, every time, time and again.

And the numbers of these layoffs won't really impact the overall unemployment stats. Many of them will be Visa workers who will either quickly find new roles/sponsorship, or leave the country. Others will also find soft landings, join startups.

Sounds more like most of them are correcting to new forecasting.

When my megacorp had down sizing the H1Bs were never touched. Cost too much to get them through the process. Would look bad when they went to the government to plead we need to increase the number of visas later. That was 10 years ago so can’t say that’s still true today.

 

[38Chevy454]

In my past, a co-worker said "The quickest and fastest way for the company to make money is with a guillotine". Tech has labor as the biggest expense, so it is also the easiest to cut back on. Look for more layoffs as recession continues and revenue thins out at the tech companies.

 

[Go-NoGo]

When my megacorp had down sizing the H1Bs were never touched. Cost too much to get them through the process. Would look bad when they went to the government to plead we need to increase the number of visas later. That was 10 years ago so can’t say that’s still true today.

Or perhaps they were just better, had a good work ethic, than others who felt being born here and entitled to a job.

 

[audreyh1]

In my past, a co-worker said "The quickest and fastest way for the company to make money is with a guillotine". Tech has labor as the biggest expense, so it is also the easiest to cut back on. Look for more layoffs as recession continues and revenue thins out at the tech companies.

Except that we don’t even know if we are in a recession yet. Q3 2022 GDP growth was a healthy 3.2% and Q4 is expected to be around the same.

 

[Vincenzo Corleone]

Or perhaps they were just better, had a good work ethic, than others who felt being born here and entitled to a job.

I wasn't going to chime in anymore regarding the H-1B visa issue, but since you felt the need to contribute your inflammatory rhetoric:

While lobbying Congress for more H-1B visas, industry claims that H-1B workers are "the best and brightest". Come payday, however, they're entry-level workers.

The wage rules for H-1B and green card sponsorship are broken down into wage Levels I, II, III and IV, with Level III being the median. The Government Accountability Office (GAO) put out a report[1] on the H-1B visa that discusses at some length the fact that the vast majority of H-1B workers are hired below the median prevailing wage level and some even at the entry-level wage level (more recently confirmed by the EPI[2]). "Level I" is officially defined by the Dept. of Labor as those who have a “basic understanding of duties and perform routine tasks requiring limited judgment". Moreover, the GAO found that a mere 6% of H-1B workers are at "Level IV", which is officially defined by the Dept. of Labor as those who are "fully competent".

This belies the industry lobbyists’ claims that H-1B workers are hired because they're experts that can’t be found among the U.S. workforce.

From the EPI reference:
"A majority of H-1B employers—including major U.S. tech firms—use the program to pay migrant workers well below market wages".

[1] GAO (2011). H-1B VISA PROGRAM Reforms Are Needed to Minimize the Risks and Costs of Current Program, GAO-11-26, January 2011.

[2] Costa, Daniel; Hira, Ron; "H-1B visas and prevailing wage levels", Economic Policy Institute, May 4, 2020

 

[MichaelB]

I think the discussion here isn’t about visas, it’s about employment and the possibility of recession.

 

[Montecfo]

^^^ All I can say is my boots on the ground experience hiring H1-Bs was different than described.

We had to pay the "prevailing wage", not sure how you avoid that. And we paid all the sponsorship fees, etc.

We did not find H1-B to be some sort of "bargain" compared to non H1-B. It was a mixed bag. It was just a way to fill positions when doing so was not easy.

And when we cut people we cut them based on objectives, not on DOL status.

I think the folks that abuse H1-B are those that contract the workers. We always tried to directly hire them.

 

[GravitySucks]

Or perhaps they were just better, had a good work ethic, than others who felt being born here and entitled to a job.

I trained my replacement who was H1B I didn’t find him any better than the rest of us. I probably worked directly with 20 or so H1Bs over the years. All were competent but only one or two outstanding.
When my manager left he did say the H1Bs rarely complained about the 80 hour weeks at crunch time. Their families were far away and if the lost the job they would probably have to go back home.

 

[Vincenzo Corleone]

^^^ All I can say is my boots on the ground experience hiring H1-Bs was different than described.

We had to pay the "prevailing wage", not sure how you avoid that. And we paid all the sponsorship fees, etc.

We did not find H1-B to be some sort of "bargain" compared to non H1-B. It was a mixed bag. It was just a way to fill positions when doing so was not easy.

And when we cut people we cut them based on objectives, not on DOL status.

I think the folks that abuse H1-B are those that contract the workers. We always tried to directly hire them.

I understand that was your anecdotal experience. However, the underpayment of H-1B workers is well-established fact, not rumor, anecdote or ideology. It has been confirmed by two congressionally-commissioned reports, and a number of academic studies in both statistical and qualitative analyses.

An employer survey conducted by the GAO (GAO, 2003) found that some employers readily admitted to paying H-1B foreign workers less than comparable Americans, but noted that they were nevertheless paying the legally required wage (i.e., the "prevailing wage"), thereby illustrating that the latter is indeed below the market wage.

The GAO found that, "some employers said that they hired H-1B workers in part because these workers would often accept lower salaries than similarly qualified U.S. workers; however, these employers said they never paid H-1B workers less than the required wage."[1]

This jibes with a previous employer survey[2], commissioned by Congress, that found, "…H-1B workers in jobs requiring lower levels of IT skill received lower wages, less senior job titles, smaller signing bonuses, and smaller pay and compensation increases than would be typical for the work they actually did."

So two employer surveys, one by the government and the other commissioned by the government, had employers actually admitting to underpaying their H-1B foreign workers. And the GAO shows that the employers admit that the prevailing wage, the legal wage floor for H-1Bs, is a joke. The data in the paper shows the underpayment statistically as well.

[1] GAO-03-883, US General Accounting Office (Sept. 2003).
H-1B Foreign Workers: Better Tracking Needed to Help Determine H-1B Program’s Effects on U.S. Workforce

[2] National Research Council (2001).
Building a Workforce for the Information Economy

Note to moderators: Sorry to make your job more difficult. You have my word that this is the last I'll speak about this issue in this thread.

 

[audreyh1]

Maybe the detailed H-1B visa discussion can be moved to another thread?

 

[Vincenzo Corleone]

Maybe the detailed H-1B visa discussion can be moved to another thread?

Yes, I hope so. I apologize for the hijack. I have strong opinions about it and sometimes can't help myself. Won't happen again.

 

[ExFlyBoy5]

Tech layoffs don't necessarily precede a recession. I don't see that they have to be related. Tech has always had its own ups and downs, as the pendulum always seems to swing too far each way, every time, time and again.

And the numbers of these layoffs won't really impact the overall unemployment stats. Many of them will be Visa workers who will either quickly find new roles/sponsorship, or leave the country. Others will also find soft landings, join startups.

Sounds more like most of them are correcting to new forecasting.

Well how about our local behemoth Paycom? HUGE company that deals with payroll. While they haven't announced layoffs as of yet, management is attempting to pull in a lot of people "back into the office" even when they were hiring folks and telling them WFH was permanent as recently as a few weeks ago. Lots of folks see the writing on the wall...a good way to get employees to leave without having terminate them. Sure, it's anectotal but in my mind one more indicator that a recessission is quite likely coming down the pike sooner than later.

 

[tulak]

An article in the Atlantic, “What the Tech and Media Layoffs Are Really Telling Us About the Economy.”

It might be behind a paywall. I read it in Apple News, for those that have a subscription.

https://www.theatlantic.com/newslet...e-really-telling-us-about-the-economy/672791/

They have a few theories on why this is happening. My favorite:

The final explanation is that chief executives are normal people who navigate uncertainty by copying behavior. We can’t rule out the possibility that five-digit tech layoffs are essentially acts of mimicry or social contagion among competitors. When all of your competitors are laying off 10 percent of their staff—and being rewarded by the market for it!—culling 10 percent of your workers may seem like the right or inevitable thing.

Personally, I suspect inflation and increase in interest rates was the starting trigger, aka, macroeconomic conditions. Since (some) companies over-hired, they are now proactively writing off or downsizing unprofitable business units.

 

[rodi]

I worked as an engineer for a fortune 100 company. Their policy was annual layoffs. It was easier to get rid of employees than firing them for cause. It happened so regularly that we called it October-fest. They were somewhat hesitant about H1B holders caused a stink because she was going to be deported - they negotiated to keep her on the payroll for an extra 3 weeks till her new job started. But in general - it was easier to get rid of problematic employees through layoffs because there was less risk of a lawsuit for ageism, discrimination, whatever.

I don't think tech layoffs are indicative of the broader labor market because a lot of big companies do what my company did - hire like crazy, then layoff the ones that don't work out.