Why these layoffs? Is recession ahead

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The markets have been abuzz with fears of a recession in the world’s largest economy. Large-scale tech layoffs amid the ongoing macro environment have further accentuated the slowdown fears. The technology sector, especially big tech firms such as Google, Meta, Twitter, Amazon, among others are cutting jobs after an unprecedented surge in demand for digital services during the pandemic.

The term “labor hoarding” has recently come into play within economic circles as the job market remains strong despite the Fed’s best efforts to cool it down.

Most tech and start-up companies have now woken up to the need for rationalisation of workforce and become more capital efficient. The ripple effect of which is also being felt back home in India.

From Byju’s, Unacademy, Zomato to Google, Cisco, Twitter, Meta and Amazon, many companies have announced layoffs in recent months. While many have cited funding winter and restructuring as the reasons for layoffs, Facebook parent Meta CEO Mark Zuckerberg said that in the new environment (post-Covid period), ‘we need to become more capital efficient’.

According to resources, as many as 1,20,000 jobs have been lost across the world this year.

Here are some details about major companies that are going through layoffs.

Meta: On November 9, Facebook’s parent company Meta announced plans to lay off 11,000 of its employees, 13% of its global workforce.

Amazon: According to a recent report, Amazon is planning to lay off approximately 10,000 people in corporate and technology jobs.

Twitter: In Twitter, Elon Musk sacked 7,500 employees, roughly 50 percent of its workforce.

Snap: Snap plans to lay off around 20% of its global workforce, or nearly 1,300 out of 6,400 employees.

Byju’s: Edtech company Byju’s is planning to fire 2,500 employees (5% of its workforce) in the next six months with an aim to boost its profit by March 2023.

Apple: The tech multinational has reportedly stopped hiring for a large number of positions outside of research and development (R&D).

Disney: The company’s chief executive Bob Chapek said in a memo that the company is instituting a targeted hiring freeze and possible staff reductions.

Microsoft: According to a latest Axios report, Microsoft laid off close to 1,000 employees across different departments in 2022.

Why the firings?

While the sudden flare-up in geopolitical tensions is blamed for the turmoil in the current global economy, it was already buffeted by the COVID pandemic and supply chain pandemic. For start-ups it is a familiar narrative.

The job cuts have also been driven by the hiring spree during the pandemic. Although the reasons are also company specific in nature, the pandemic hiring spree cannot be ignored either. A high level of automation has also gained momentum which has affected the need for labour.

Automation is not just substituting human labour for machine labour. Rather at its core it is about implementing a system to complete and repetitive tasks without the need for human labour. These technical makeovers are one of the major driving forces behind massive job reductions in the sector.

 

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