For tech firms, the growth is in job cuts

Buzz about sky-high profits replaced by drumbeat of gloom and layoffs

After getting a pay raise just a couple of weeks ago, one former employee of tech startup Bolt posted on an anonymous online forum that he had been laid off.

A Bolt spokesperson confirmed to the SF Gate news website in May that the company that helped popularize a push for a four-day workweek in Silicon Valley was laying off "approximately a third of the company".

"It's no secret that the market conditions across our industry and the tech sector are changing, and against the macro challenges, we've been taking measures to adapt our business," Maju Kuruvilla, Bolt's recently appointed chief executive, said in a letter to staff.

The payment-services startup laid off around 250 of its 900 employees in May amid industrywide financial challenges, The New York Times reported.

Like Bolt's former employees, thousands of other tech workers from US-based companies including Netflix, PayPal, Getir, Klarna and Carvana were let go in May. They may struggle to find new jobs as founders and investors prepare for what looks like an economic downturn and, according to some economists, perhaps a recession.

Last month, technology startup accelerator Y Combinator sent an email to its portfolio founders warning them to "plan for the worst".

The company said the economic downturn would likely most affect "international companies, asset-heavy companies, low-margin companies, hard tech, and other companies with high burn (of revenue) and a long time to revenue".

Tesla CEO Elon Musk ordered a worldwide hiring freeze and sent a message to employees last Thursday telling them the company planned to cut 10 percent of its 100,000-employee workforce, explaining that he has a "super bad feeling" about the economy.

The email sent Tesla shares down 9 percent the next day. The job-cuts email was a "minidisaster" for Tesla shares, Dan Ives, a tech analyst for Wedbush Securities, told the CNN network. "Any hint of economic softness from an influential person like Musk will be heard around the world," he said.

'Slowing down'

Mark Zandi, chief economist at Moody's Analytics, told the Los Angeles Times: "The jobs market is booming, but it actually has to slow down because the economy is very close to, if not already at, full employment." Full employment is when everyone who wants to work has a job.

"If it doesn't slow, the economy will blow past full employment, inflation will become persistent, and the wage growth will exacerbate high inflation," he said.

Once the engine of US economic growth, tech companies are now slowing after decades of rapid sales growth and boundless job growth. Companies that have announced layoffs or hiring freezes since the beginning of the year have cited lower profits or higher costs.

Meta, the parent company of Facebook, is limiting new hires due to underwhelming revenue forecasts.

In May, Microsoft told Bloomberg it was slowing hiring for its Office, Windows and Teams groups to manage the economic climate. Last week, the company revised its fourth-quarter revenue and earnings guidance downward.

Online car dealer Carvana last month said it would lay off 2,500 employees, or about 12 percent of its staff, and Warner Bros Discovery shut down the CNN+ streaming service in April, just weeks after its launch.

Roughly 17,000 workers were fired from 71 tech startups around the world in May－the highest number since the early panic of the pandemic in May 2020, according to data compiled by the tech-layoff tracking site Layoffs.fyi.

More than 126,000 tech workers lost their jobs during the pandemic, according to the site.

The biggest layoff of 2022 so far came from Turkish delivery startup Getir, which sacked roughly 4,480 employees on May 25, just two months after a $768 million fundraising round.

The instant delivery service blamed the layoffs on increasing inflation.

"Rising inflation and the deteriorating macroeconomic outlook around the world pushes all companies, especially in the tech industry and, including Getir, to adjust to the new climate," according to a company memo obtained by TechCrunch.