The US recession never arrived, but that hasn't stopped the tech bros. Layoffs continue to roll in, and they show no signs of slowing under pressure from Wall Street to squeeze profit margins and redeploy assets to artificial intelligence.
In just the first six weeks of the year, waves of job cuts from Big Tech and beyond have collided with otherwise healthy signals from the rest of the economy. If last year was tech’s “year of efficiency,” dispensing with COVID-era bloat, 2024 is shaping up to be a year of thrift and shuffling resources.
Churning for higher profits is only part of the story. Tech firms are shaping leaner teams as they turn their attention and investment dollars toward ambitious, long-term plans to develop AI technology. Investors, too, are focused on identifying the winners at the frontier of generative AI.
"We’ve now graduated from the euphoric ‘land grab’ phase of the artificial intelligence mania and are now in the ‘show me’ phase,” said Michael Farr, chief market strategist for Hightower Advisors, and founder and CEO of Farr, Miller & Washington.
So far this year, more than 100 tech companies have said goodbye to 32,000 employees, according to data from layoffs.fyi. Management teams have followed one another with layoff announcements that juiced share prices as the market continues to reward overt displays of cost discipline, as Yahoo Finance news chief Myles Udland reported this week.
“After a painful market reset in 2022 which hit big tech particularly hard, there is a new sense of scrutiny being placed on big tech by Wall Street, with investors laser-focused on the bottom line,” said Nicole Tanenbaum, partner and chief investment strategist at Chequers Financial Management.
Tech companies have already pushed through significant cuts following the hiring spree of the pandemic boom, and they continue to trim headcount as they shuffle resources internally, Tanenbaum said. The layoffs are coming even as executives post robust revenue and earnings.
While the magnitude of the current bout of layoffs has not matched the dramatic cuts of 2023, the announcements have come in relentlessly.
In January, Google (GOOG, GOOGL) laid off hundreds of workers to trim costs and refocus on its business priorities. Amazon (AMZN) eliminated several hundred roles across Prime Video and MGM Studios, as well as more than 500 people at its video game livestreaming platform, Twitch. Earlier this week, Snap (SNAP) cut 10% of its staff. And on Wednesday, Bloomberg reported that Tesla (TSLA) workers are bracing for potential cuts after managers were asked whether their employees’ positions are critical.
Similar to last year, a copycat dynamic among companies built momentum and offered ready-made justification for subsequent layoffs. Wall Street celebrated the steep cuts of major players like Amazon and Meta (META), whose stocks over the past six months have risen 18% and 44%, respectively.
Employers and recruiters have emphasized that major layoffs can leave remaining staff with the workloads of multiple jobs and create morale problems. But some executives see productivity stretching to meet the moment.
During Meta’s earnings call last week, CEO Mark Zuckerberg expressed how his company’s hiring pace is on a new, minimalist trajectory. “My operating assumption is that we will also try to keep it relatively minimal because I think that — until we reach a point where we’re just really underwater on our ability to execute, I kind of want to keep things lean, because I think that’s the right thing for us to do culturally,” he said.
In part due to Meta’s boosted efficiency, shares have popped more than 15% since then.
The moves to appease Wall Street, which often cheers the firing of people, could backfire. Cutbacks spark fear among staff and leave remaining workers with the burden of doing more with less. Layoffs can also damage a company's reputation, as they signal to employees and potential recruits that staffers are disposable and that the penalty of management decisions falls on workers, rather than on the executives in charge.
Despite the recent bout of high-profile layoffs, however, broader labor market data show resilience. Tech companies added nearly 18,000 workers last month, and job postings for open positions recorded a rebound, according to CompTIA, a nonprofit association for the tech industry. And the unemployment rate for tech occupations was 2.3%, the data show, compared with the national unemployment rate of 3.7%.
“The fact that investors have rewarded companies for recent job cuts is likely a signal that they view those moves as strategic shifts that may lead to greater profits and not a sign of concern for company performance,” said Cory Stahle, an economist at Indeed Hiring Lab.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on Twitter @hshaban.
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