A grim new situation is emerging in the entire technology sector: the era of decades of rapid income growth, unlimited employment opportunities and soaring stock prices is coming to an end. Instead, there is an era of expected revenue decline, which is characterized by layoffs and slowing recruitment, a sharp reduction in revenue growth expectations, and the shelving of expansion plans. This sluggish situation is damaging employee morale, affecting the industry's ability to attract talent, and has a broad impact on U.S. economic growth and innovation.
The business environment is becoming more and more complex under the background of the sustained economic slowdown, the continuous conflict between Ukraine and Russia, the rising interest rate and inflation, and the third year of the COVID-19. In the past two weeks, a large number of well-known companies have shown a flagging posture. On May 23, snap (snap.us), a social media application, lowered its sales and profit expectations and said it would slow down the pace of recruitment. On May 24, LYFT (lyft.us) said that it would reduce manpower and seek other cost cutting measures. A few days later, Microsoft (msft.us) suspended the recruitment plans of several key departments. Instacart, on the other hand, said it would reduce its recruitment plan before the initial public offering to reduce costs.
Until yesterday, this trend continued. Elon Musk, CEO of tesla.us, told employees that the electric vehicle manufacturer needs to reduce its employees by 10% and suspend global recruitment. Coinbase (coin.us), a cryptocurrency exchange, also said that it would extend the recruitment freeze according to market conditions and cancel some accepted job offers.
Other similar pessimistic statements have been circulating for weeks. Amazon (amzn.us) has too many employees and too much warehouse space, and its business is being affected by the rapid rise in inflation costs. Meta platform (fb.us) is reducing recruitment and cutting expenses. Twitter (twtr.us) froze recruitment and withdrew some job offers before musk planned to acquire. Apple (aapl.us) warned in April this year that in China, the restrictive measures related to the COVID-19 would reduce the company's revenue by as much as 8billion US dollars in this quarter.
Generally speaking, the setback of corporate ambition marks a change in the atmosphere of an industry, although the industry once seemed impregnable and had suffered greater economic impact. "Technology companies are no longer a safe bet," said Tom forte, a technology industry analyst at d.a.davidson, referring to the giants in the technology industry. "Because there are many factors against them."
It is understood that the Nasdaq composite index has fallen by a quarter since it reached an all-time high on November 19 last year. Worse, the nightmare of layoffs has begun to disturb the "minds" of employees. On the application blind, where employees can talk about employers anonymously, from April 19 to May 19, the discussion on hiring freeze increased by 13 times over the same period last year, while the discussion on layoffs increased by 5 times, and the discussion on economic recession increased by 50 times. In May this year, there was speculation on social media that meta was preparing to lay off staff. However, a meta spokesman said that the company currently had no layoff plan.
The US economy seems to have lost momentum. According to layoff.fyi, more than 126000 skilled workers have lost their jobs since the outbreak began. As the growth of users shrank, nflx.us said last month that the company would cut about 150 jobs; Since mid November, the share price of the streaming media giant has fallen by 71%. In meta, the company's management slowed down the recruitment of many middle and senior positions and reduced the recruitment of inexperienced engineers in April.
At the same time, twitter employees are preparing for potential layoffs because the company is waiting for the arrival of the new boss musk, who promised the banks to cut costs. At the beginning of May this year, Parag Agrawal, CEO of twitter, had already warmed up for cost reduction. He sent an email to more than 7500 employees of the company, explaining that the social network would start from reducing travel, marketing and activity costs, and telling executives to "strictly control the budget and give priority to the most important things". Similarly, uber.us said in a memo to employees that the car Hailing service giant would "carefully consider when and where to increase the number of employees." An Uber employee, who asked not to be named, said that this sentiment was affecting the morale within the company.
At present, the impact on technology companies such as meta, twitter and Uber may be considerable. During the 2008 financial crisis, these technology enterprises were still in their infancy. When the Internet Foam Burst at the beginning of the century, the situation was worse than it is now. The difference this time is that the COVID-19 has promoted the development of some scientific and technological products in a disguised form, thus providing some buffers for them. Russell Hancock, CEO of joint venture Silicon Valley, said that what is happening now seems to be just a market adjustment, although he is also worried that as technology products such as streaming media services and social networks are increasingly turning into a public utility product, the brilliance and innovation of such technology industries may disappear. "We may start to consider such technologies as utilities similar to natural gas pipelines," he said "This is new to Silicon Valley."
As technology companies enter an increasingly difficult economic environment, they have to make an issue of over recruitment and marketing. In 2020, Amazon invested a lot of money in staff and warehouse space to meet the surge in distribution demand related to the COVID-19. Now it finds that it has too many warehouses and too many workers. According to a person familiar with the matter, the Seattle based company announced that its warehouse space exceeded its needs, which disturbed hundreds of employees of the company. Employees who used to work on many construction projects suddenly have nothing to do. The manager suggested that they spend more time focusing on "learning and development", which makes people feel uneasy.
Mark Zuckerberg, CEO of meta, said in February this year that the company is giving priority to developing some products, such as reels and metauniverse. "We are shifting most of our internal energy to these high priority development areas," Zuckerberg said in April this year. In addition, the company said it would cut its spending by $3billion in 2022, which is the first signal that the company has become more prudent in investment.
Although the situation is quite grim at present, the technology industry has not reached the moment of survival. According to the data of joint venture, the unemployment rate in California is only 2%, the lowest level since 1999. Other data from the California Center for Economic Sustainability (ccsce) show that the employment growth in the San Francisco Bay Area in the past year was 5.8%, higher than the national and California average. Stephen levy, director and senior economist of ccsce, said that any slowdown in recruitment needs to be considered against the background of the rapid rise of the technology industry. "The world needs more scientific and technological products and services. This is a long-term growth area," he said
