Big Tech Binged on Workers During Covid. Now, the Purge. | Tech News

Big Tech Binged on Workers During Covid. Now, the Purge.

The spate of layoffs is a reaction to a hiring wave during the pandemic that got out of hand. But will it be an overreaction?

| Updated on: Jan 27 2023, 10:07 IST
“Over the past two years we’ve seen periods of dramatic growth,” wrote Sundar Pichai of Google. (AFP)
“Over the past two years we’ve seen periods of dramatic growth,” wrote Sundar Pichai of Google. (AFP)

The layoff announcements coming lately from the chief executive officers of big technology companies all contain variations on the theme of “we hired too many people during the pandemic,” expressed with varying degrees of contrition.

At one end of the spectrum are Seattleites Andy Jassy of Inc. and Satya Nadella of Microsoft Corp. Amazon's layoffs were simply an outgrowth of its annual review, Jassy wrote, although he did allow that “this year's review has been more difficult given the uncertain economy and that we've hired rapidly over the last several years.” Microsoft's Nadella opted for bland corporatespeak: “As we saw customers accelerate their digital spend during the pandemic, we're now seeing them optimize their digital spend to do more with less.”

Down in the San Francisco Bay Area, there was more of a willingness to hint that errors had been made. “Over the past two years we've seen periods of dramatic growth,” wrote Sundar Pichai of Google parent Alphabet Inc. “To match and fuel that growth, we hired for a different economic reality than the one we face today.” Mark Benioff of Salesforce Inc. was even clearer: “As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we're now facing, and I take responsibility for that.” Then there was Mark Zuckerberg of Meta Platforms Inc., who opted to treat his November layoff message to employees as something of a confessional:

At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth. Many people predicted this would be a permanent acceleration that would continue even after the pandemic ended. I did too, so I made the decision to significantly increase our investments. Unfortunately, this did not play out the way I expected.

Zuckerberg, of course, may have many other things to be contrite about, starting with the 2021 decision to rename Facebook and bet its future on virtual-reality headsets. But, yes, Meta truly did hire a ton of people in 2020 and 2021, with headcount up 60% over that period. For Microsoft, Alphabet, Salesforce and Meta, the combined increase was 35%, or 126,170 jobs.

The layoffs announced so far by these four companies total 41,000, about a third of the jobs they added since 2019. Amazon is on a different employment plane, with most of its workforce laboring not at computers but in warehouses, supermarkets and other elements of what the company calls “field and customer support,” which is why I left it off the chart. It added 810,000 employees from 2019 to 2021, more than doubling its headcount, and employs more people than any US corporation other than Walmart Inc.

Amazon has announced 18,000 layoffs so far this fall and winter, the most of any tech company but only 2.2% of its 2019-2021 headcount increase. The company did shed 99,000 employees in the second quarter of 2022 through what it said was mainly attrition of warehouse and logistics workers but added 21,000 in the third quarter. (Amazon includes employee counts in its quarterly earnings releases; most companies only report the number once a year in their 10-K annual report.)

The current 2022-2023 tech layoff total as tallied by, which includes companies in retail, finance, health care and crypto, is 219,132, of which 59,448 have been announced this year. Meanwhile, US employers overall added 4.5 million jobs in 2022, according to the Bureau of Labor Statistics, with no real sign of a slowdown in the December jobs numbers.

Full December numbers aren't available yet for the industry categories that cover most or all of what Microsoft, Alphabet, Salesforce and Meta do, but these three sectors added 117,000 employees over the first 11 months of the year, more than they added in 2020 or 2021. (The BLS tries to sort payroll jobs data by “establishment” rather than company, so the employees of Amazon Web Services, the company's cloud-computing subsidiary, should in theory be counted below as well.)

This hiring boom has been going on for a while, but it accelerated over the past three years, as is easier to see with a line showing the previously prevailing trend for comparison.

There were signs of an acceleration even before Covid-19 arrived, which casts some light on why tech CEOs thought what they were seeing during the pandemic might represent the new normal. As of November, these sectors employed almost 171,000 more people in the US than they would have if they had stuck to the previous decade's hiring trend. Now it looks as if tech executives are trying to push headcounts back toward where they would have been if not for that heady time when they thought they were in the midst of what Zuckerberg called a “permanent acceleration.”

Permanent acceleration isn't really a thing in business. As your company gets bigger, its rate of growth slows. Sure, there can be doldrums followed by revivals, and belief in permanent acceleration is sort of the point of startup investing, where it works until it doesn't. But for big, established companies (Meta turns 20 next year; Microsoft will soon be 48), it can lead to fraught situations like the one unfolding now.

Note that I haven't mentioned Apple Inc. here. It hasn't announced any layoffs and didn't accelerate hiring during the pandemic, with its headcount growing at annual rate of 6% from 2019 to 2022 (Apple's fiscal year ends in September, so it has already reported its end-of-year headcount) after posting 8% annual growth over the previous five years. The same goes for a tech sector that employs even more people than the three shown above, computer systems design and related services.

This is the territory of companies such as Accenture Plc, the third-largest employer on the Standard & Poor's 500 Index, which mostly try to help companies not in the tech industry and other institutions keep up with tech developments (“become the next and best versions of themselves,” is how Accenture puts it). Payroll employment in the sector fell early in the pandemic but recovered quickly in late 2020 and 2021, with hiring settling back in 2022 into a path just below its pre-pandemic trajectory. So far there have been no indications that this is about to change.

The recently announced tech layoffs are of course painful for the more than 200,000 workers who are getting their notices and having to enter a job market suddenly flooded with other layoff casualties with similar skills and experience. As my fellow Bloomberg Opinion columnist Sarah Green Carmichael writes, the layoffs may backfire on the companies doing them by damaging employee morale and customer relationships.

They are also, however, clearly a reaction to a hiring boom that got a little out of hand. With other US employers struggling to hire enough people over the past couple of years (there were 3.3 million, or 51%, more reported job openings in November than three years earlier), the situation faced by tech companies is unique. The “economic downturn we're now facing,” according to Salesforce's Benioff, is not a general phenomenon — at least not yet. The risk is that tech companies' abrupt shift from hiring to firing could help make it one.

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First Published Date: 27 Jan, 10:07 IST