One of the major conversation points of 2022 all over the world has been about tech layoffs. What started off as a stock-taking exercise – companies taking inventory of current employees vs the actual manpower necessary per team as an effort to reduce overhead costs and stay profitable – has quickly snowballed into mass layoffs across the globe.
Though the first two quarters of the year did not set off any major alarms, the news about layoffs from the past few months has sparked global panic. Most Fortune 100 tech companies were standing on unsteady legs since the beginning of the year and took a turn for the worse following the half-year mark. In recent weeks, several thousand employees have been laid off and the numbers are expected to climb as we enter 2023.
In November alone, over 50,000 employees lost jobs in mass layoffs, bringing this year’s total approximately to 92,000. The devastating trend has not only been seen in smaller businesses, but the biggest impact has been from the titans of the tech industry – Amazon, Meta, Twitter, and many may follow in the upcoming months.
At first glance, this may seem like an unexpected turn of events, but the way tech companies saw explosive growth from the onslaught of the pandemic, the likelihood of mass tech layoffs was inevitable.
While most may perceive these downsizings to be warning signs and a surefire way into recession, a closer inspection of the global market provides clarity on why that isn’t the case. Read on.
The Beginning of the Tech Layoffs 2022
The pandemic was a boon to business for several tech companies, predominantly those operating in the internet space. As organizations across the globe moved to a remote working setup, it created an exponential surge for online connectivity platforms and productivity tools. As remote working became the norm, tech businesses had tremendous demand for their services.
Companies like Zoom, Microsoft, Meta, and Google suddenly saw a surge in users that required their video calling, planning, productivity, and to a large extent, social media services as the world transitioned to spending “every minute online”, particularly during the lockdown.
Due to the global shutdown, online shopping and entertainment consumption saw a staggering increase in volume as every person was forced to live online- without the possibility of in-office work or social activities. Companies like Amazon, Netflix, and other streaming/shopping platforms were in high demand with a booming customer base.
While several businesses tanked during this period, internet companies soared in profits and continued riding that wave until the beginning of 2022. These record levels of revenue, unseen before the pandemic, drove tech giants into a hiring frenzy. Tech workers started getting bigger paychecks and teams began growing to keep up with the tremendous appetite for their products and services.
The Situation Today
Most tech companies expected remote working to become the new way of working, not going out of style anytime soon. Driven by this change, teams had to radically expand to keep up with the excess traffic volume and as a preventive measure – as most tech companies pad teams with extra employees to compensate for key personnel jumping ship.
Two years later, the world has largely returned to its pre-pandemic way of life where most work happens in the office, social activities have resumed, and people can travel freely. Tech giants quickly learned that they cannot sustain the same level of profitability; it dawned on them that the explosive growth in business has been curtailed.
Meta, one of the MAANG companies had to let go of 13 percent of its workforce. Mark Zuckerberg, CEO of Meta, shares his thoughts in a blog post saying, “Not only has online commerce returned to prior trends, but the macroeconomic downturn, increased competition, and ads signal loss have caused our revenue to be much lower than I’d expected. I got this wrong, and I take responsibility for that.”
Corporations with the highest bloating had to shed off the extra weight which meant putting a freeze on hiring and mass layoffs. Data from the largest 20 layoffs shows which industry has seen the most loss of jobs. The consumer industry has seen the highest impact with over 18,000 people laid off by Meta, Twitter, and Bytedance. The retail industry follows closely with over 12,000 roles made redundant largely by Amazon and Groupon. Transportation is third on the list with over 9,000 layoffs by Uber and Carvana.
The Outlook for Tomorrow
While the situation does look dire and with conversations about a possible recession in 2023, the outlook for the global job market remains positive.
In 2022 alone, over 8.5 million roles have been posted in the tech industry* globally. Some of the highest roles in demand were Software Developers and Computer & Information Systems Managers.
Source: JobsPikr Insights
The current layoffs are a result of the tech industry undergoing a course correction to rectify their drastic workforce expansions – a decision most companies made to portray a state of huge growth. Even with these mass redundancies – mainly by tech behemoths, they largely remain a result of explosive growth and flawed planning.
Despite the market chatter surrounding layoffs, several tech companies continue to hire, some even accelerating their recruitment. This data adds merit as it shows that not all companies in the industry are affected by this economy and some continue to thrive. While there is uncertainty about what the global economy in 2023 will look like, it isn’t all doom and gloom. The labor market continues to be robust and will endure any short-term fluctuations.
*Data sourced from JobsPikr Insights