The US recession never arrived, but that didn't stop the tech bros. Layoffs continue, and show no signs of slowing under Wall Street pressure to shrink profit margins and reallocate assets to AI.
In just the first six weeks of the year, waves of job cuts from Big Tech companies and beyond have collided with healthy signals from the rest of the economy. If last year was the “year of efficiency” for technology, dispensing with the bloat of the Covid era, then 2024 will become a year of saving and shuffling resources.
Striving for higher profits is only part of the story. Technology companies are forming smaller teams as they direct their attention and investments toward ambitious, long-term plans to develop AI technology. Investors are also focused on identifying winners on the frontiers of generative AI.
“We have now graduated from the euphoric ‘land grab’ phase of AI mania and are now in the ‘show me’ phase,” said Michael Farr, chief market strategist at Hightower Advisors, and founder and CEO of Farr, Miller. And Washington.
So far this year, more than 100 tech companies have said goodbye to 32,000 employees, according to data from Layoffs. For your information. Management teams followed each other with layoff announcements that sent stock prices soaring as the market continued to reward public displays of cost discipline, the head of Yahoo Finance news said. Miles Udland I reported this week.
“After the painful market reset in 2022 that hit big tech companies particularly hard, there is a new sense of Wall Street scrutiny on big tech companies, with investors focused on the bottom line,” said Nicole Tannenbaum, partner and chief investment officer. Strategist at Checkers Financial Management.
Technology companies have already made deep cuts in the wake of the pandemic boom's hiring spree, and continue to cut headcount as they adjust resources internally, Tannenbaum said. The layoffs come even as executives post strong revenues and profits.
While the scale of the current wave of layoffs has not matched the deep cuts of 2023, the announcements have been relentless.
In January, Google (GOOG, GOOGL) laid off hundreds of workers to cut costs and refocus on its business priorities. Amazon ( AMZN ) has cut several hundred roles across Prime Video and MGM Studios, as well as more than 500 people at its video game streaming platform, Twitch. Earlier this week, Snap (SNAP) cut 10% of its staff. On Wednesday, Bloomberg reported that Tesla (TSLA) workers were bracing for potential cuts after managers were asked if their employees' positions were critical.
Similar to last year, the copycat dynamic between companies built momentum and provided ready justifications for subsequent layoffs. Wall Street celebrated the sharp cuts of major players like Amazon and META, whose shares have risen over the past six months by 18% and 44%, respectively.
Employers and recruiters have emphasized that major layoffs can leave remaining employees overworked in multiple jobs and create morale problems. But some executives see productivity stretching to keep up with the moment.
During a Meta earnings call last week, CEO Mark Zuckerberg expressed how his company's hiring pace is on a new, simpler path. “My operating assumption is that we'll also try to keep it relatively minimal because I think that — until we get to a point where we're really underwater in our ability to execute, I kind of want to keep things simple, because I think this is the right thing to do,” he said. We do it culturally.”
Partly due to enhanced meta efficiency, shares have risen more than 15% since then.
Moves to appease Wall Street, which often encourages firings, can backfire. Cutbacks create fear among employees and leave remaining workers with the burden of doing more with less. Layoffs can also damage a company's reputation, because they signal to employees and potential hires that employees are disposable and that the penalty for management decisions falls on the workers, not on the executives in charge.
But despite the recent wave of high-profile layoffs, broader labor market data shows resilience. Technology companies added nearly 18,000 workers last month, and job postings for open positions posted a rebound, according to CompTIA, a non-profit association for the technology industry. The data showed that the unemployment rate in technical professions reached 2.3%, compared to the national unemployment rate of 3.7%.
“The fact that investors are rewarding companies for recent job cuts is likely a signal that they view those moves as strategic shifts that could lead to greater profits rather than a sign of concern about company performance,” said Corey Stahl, an economist at Indeed Haring. laboratory.
Hamza Shaaban is a reporter for Yahoo Finance covering markets and economics. Follow Hamza on Twitter @hshaban.
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