“Disaster” in Silicon Valley: Tens of thousands of people lost their jobs in just a few weeks

, “Disaster” in Silicon Valley: Tens of thousands of people lost their jobs in just a few weeks

Tech workers who were once confident in their ability to find work through their skills will now have to compete with thousands of others for jobs.

Last week alone, Silicon Valley companies laid off more than 20,000 employees. In reality, however, a rapid increase in job cuts and hiring freezes has been going on in the tech industry for months.

Twitter, Meta, payments platform Stripe, software services company Salesforce, ride-hailing company Lyft and a host of smaller companies all have double-digit layoff rates. That means tens of thousands of engineers, salespeople and support workers in one of America’s most important and highest-paid industries without a job. Meanwhile, other companies including Google have recently seen hiring slows and freezes.

These layoffs are reinforcing the ongoing reality in Silicon Valley that the bull market of the past decade – helping to create a huge amount of wealth for technology investors, workers, and the industry and the broader economy – has come to an end.

Lise Buyer, a longtime tech analyst, executive, and investor, mentions the dotcom crash of the 20th century. “Engineers, engineers, and engineers, and then all of a sudden, all of a sudden companies throw a bucket of cold water in their faces.”

Executives at companies making staff cuts blame many interrelated factors — overhiring during the pandemic, slowing e-commerce activity, and people spending more time in the country and less time online as live events return. Tech CEOs have been warning of an impending recession for months, telling their employees that working conditions will be tougher and dramatically slowing the rapid growth they’ve enjoyed in many years.

, “Disaster” in Silicon Valley: Tens of thousands of people lost their jobs in just a few weeks

, “Disaster” in Silicon Valley: Tens of thousands of people lost their jobs in just a few weeks

When it comes to newer tech companies, low interest rates over the past decade have made it easier for venture capitalists to raise money and pour into startups — even if the founders of they don’t have a solid plan to actually make money.

During the pandemic, that momentum has become unduly high. At the same time, larger tech companies have expanded rapidly to take advantage of people spending more time online. Tech stock prices skyrocketed, boosting confidence and stock-based payouts for workers.

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But now that the Federal Reserve is aggressively raising interest rates to fight inflation, venture capitalists are becoming more stingy with their investments, forcing companies to focus on profits rather than growth. Tech giants are doing the same, as falling revenue forces them to cut costs.

The layoffs come just a year after Silicon Valley reached its peak, with major tech companies valuing trillions of dollars, wages at all-time highs, and money pouring in pockets of investors as well as workers. Now, tens of thousands of workers are looking for work.

Marc Weil taught himself to code at the age of 9 and has worked in technology at various companies since 2010, even at one point starting his own startup. This week, the 35-year-old technical director at Stripe was among thousands of people who lost their jobs.

“Year after year, and the tech economy grows stronger with no signs of ending” Weil said. People in the tech sector have been warned by those who’ve lived for the past few decades that this will come to an end. And that’s the end of the hour.”

Weil bought a house just three weeks before being laid off. But he’s not too worried about finding a new job, thanks to the network he’s built over 10 years in Silicon Valley. He cares more about his young colleagues.

Spokespersons for Lyft, Twitter, Facebook, Amazon and Google did not respond to requests for comment. A spokesperson for Stripe referred to a blog post the company’s CEO wrote about laying off employees.

“We are facing persistent inflation, energy shocks, higher interest rates, reduced investment budgets and sparser start-up capital” Chief Executive Officer Patrick Collison said in the post. Salesforce spokeswoman Annie Vincent said the company is assisting employees who have been laid off.

For the past 10 years, Big Tech companies have dominated the US economy. Apple, Amazon, Google, and Microsoft have all broken through the trillion-dollar valuation mark, becoming the most valuable institutions in modern history. They compete with venture capital startups like Uber, WeWork, Airbnb and Stripe for business and tech talent, raise wages, cost of living.

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But over the past year, cracks have begun to form in that dominance. Leaders of companies began to warn of cuts, and companies like Google, Microsoft, and Facebook quietly made hiring cuts. During the summer, as economic sentiment swings back and forth between positive and negative, companies also send mixed messages.

Over the past few weeks, concerns have deepened, as a wave of earnings reports showed that even the most solid of companies like Amazon and Google are having serious trouble keeping up the pace of revenue growth as it has in the past few years.

Share prices of Facebook and Amazon fell more than 20% when they reported quarterly results in the last week of October. Amazon’s forecast for the most important holiday season fell short of what analysts expected to wait and Facebook investors began to leave the company after chief executive Mark Zuckerberg made it clear that he intends to continue to lose money as the company focuses on building a new “super-reverse” empire with “virtual universe”.

Microsoft and Google, the 3rd and 4th most valuable companies in the world after Apple and Saudi Aramco, also reported slowing revenue growth, indicating demand for digital advertising and cloud software is decreasing.

Last week, Twitter under new owner Elon Musk laid off about half of the company’s 7,500 employees. Musk said on Thursday that the company would need to find new sources of revenue or it would not “survive the coming recession.”

The statement came a day after Zuckerberg said the “macro-economic downturn” was one of the reasons he needed to lay off 11,000 employees, or 13% of Meta’s workforce. This marks the first large-scale job cuts in the company’s 18-year history.

According to Layoffs, a layoff tracker run by tech founder Roger Lee, the weekly layoffs bring the total number of tech workers laid off in 2022 to more than 120,000.

Tech workers who were once confident in their ability to find work through their skills will now have to compete with thousands of others for jobs.

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Sarah Cho, 23, graduated from UCLA this year and had only been starting her first job as a product manager at Lyft for a few months when she received her layoff notice.

The catch is, the cuts may not be over yet.

“We’re almost certainly going to see more” said Julia Pollak, chief economist at ZipRecruiter, a job search website. Tech companies will be under increasing pressure to cut costs and become profitable sooner.”

This week’s layoffs have slashed Silicon Valley headcount significantly, but most large companies still have more employees than in 2019. However, “the rapid reversal of The trend towards over-hiring and overinvesting is having a huge morale impact” said Buyer, a tech analyst during the dotcom crash and who recently advised companies on structuring initial public offerings.

“That’s why the mood is so shocking and disappointing” she said.

For years, skilled tech workers have been hopping between companies, taking advantage of one job to earn higher wages elsewhere. For engineers just starting out, it’s not uncommon to receive offers of $200,000 a year plus signing bonuses from major tech companies. Tech companies offer perks like complimentary meals, massages, dog walks, and on-site laundry, plus unlimited days off. With so many recent layoffs in the market, that’s about to change.

Rene Ronquillo, 37, rose from a Lyft driver to a full-time job at the company as a recruiter. He thinks a lot of workers will have to take a pay cut or find jobs below their level of experience if they want a new job in this environment.

“Can’t be too picky” he said.

Semil Shah, a general partner at venture capital firm Haystack, estimates there could be 25,000 to 50,000 tech workers without jobs on the job market in the next few months. Wages will drop and people will take jobs they might not have considered before.

But, “in the long run, the current shock could be a good thing” said Shah.

Source: Washington Post

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