Layoffs, hiring freezes chill US tech industry

While the US job market remains strong overall, signs of cracks in the economy have emerged, particularly in the tech sector, where the carefree days of foosball tables in the break room seem like a distant memory — and none of the Big Tech names are immune.

Amazon.com Inc announced a hiring freeze on Thursday.

"We're facing an unusual macroeconomic environment, and want to balance our hiring and investments with being thoughtful about this economy," Beth Galetti, senior vice-resident of people experience and technology at the e-commerce multinational, said in a memo to employees this week.

At Twitter Inc, Elon Musk plans to cut about 3,700 jobs or half of the social media company's workforce in a bid to cut costs, Bloomberg News reported on Wednesday, citing people familiar with the matter.

The multibillionaire Musk, Twitter's new owner, will inform the staff affected on Friday, according to the report.

Crunchbase, a business information company, has calculated that some 44,000 workers in the tech industry have lost their jobs in 2022.

Ride-hailing service Lyft Inc said on Thursday it would lay off 13 percent of its workforce, or 683 employees, in its latest cost-cutting step to cope with a weakening economy.

"The announced reduction in force is a proactive step as part of the company's annual planning," Lyft said in a statement.

Stripe Inc, the digital payments service that was valued at $95 billion in its last funding round, is cutting staff by about 14 percent as startups try to navigate a tough rush by the investment market to control costs.

"We were much too optimistic about the internet economy's near-term growth in 2022 and 2023 and underestimated both the likelihood and impact of a broader slowdown," Stripe's founders, CEO Patrick Collison, and his brother, John Collison, said in an email, adding that they had overhired and grew operating costs too quickly.

Eric Wu, CEO of real estate technology company Opendoor Technologies Inc, announced Wednesday that "we've made the difficult decision to reduce our team by 550 people across all functions — approximately 18 percent of the company".

"The reality is, we're navigating one of the most challenging real estate markets in 40 years and need to adjust our business," Wu said in a statement.

Intel Corp is cutting jobs and slowing spending on new plants in an effort to save $3 billion next year, the chipmaker said last week.

Microsoft Corp has laid off as many as 2,800 workers since July. On Oct 25, the software giant announced its cloud-computing growth decelerated and that revenue for the holiday season could be more than $2 billion lower than expected.

At Facebook parent Meta Platforms Inc, employees are being told to ramp up their efforts after the company reported a 52 percent drop in earnings on Oct 26, as its metaverse and virtual and augmented reality efforts face headwinds.

"Zuck's message was loud and clear: You have three months to prove your worth, put in 200 percent effort, or you can resign now if you don't like it," one unnamed Meta employee told Business Insider, referring to Meta CEO Mark Zuckerberg.

At Google parent Alphabet Inc, revenue grew by 6 percent in the third quarter, but it was the first time that sales had grown less than 10 percent since the thick of the coronavirus pandemic in 2020.

Apple Inc, which has fared better than its Big Tech counterparts, reportedly has implemented a hiring freeze across its divisions, according to a report in Business Insider.

Zillow Group Inc, an online real estate marketplace headquartered in Seattle, laid off 300 people, or 5 percent of its workforce on Oct 26.

As decades-high inflation hits consumer spending and drives up business costs, companies are cutting jobs and downsizing operations to protect profits.

"Companies are viewing this time as an opportunity to right-size," said Gene Munster, managing partner at investment and research firm Loup, to The Wall Street Journal. He said that tech companies that overbuilt during the pandemic are now focusing on productivity.

"There wasn't a need before to ask questions around productivity because things were so good, but that has changed as things have slowed down," Munster said.

Companies such as Lyft and Uber Technologies Inc, both based in San Francisco, rely on gig workers. They have lately faced concerns that a Labor Department proposal seeking to limit the use of independent contractors could drive up costs.

But experts believe that legal challenges and business groups lobbying for changes could head off the Biden administration's efforts.

US technology stocks have been hammered this year as tighter monetary policy by the Federal Reserve — which raised interest rates for the sixth time this year on Wednesday — and worries of a recession have jolted investors.

The tech-heavy Nasdaq Composite index is down 33.9 percent year to date, after posting gains of 21.39 percent in 2021, and 43.64 percent in 2020.

In the venture capital market, investors concerned about overpaying have avoided writing big checks for startups.

"All the layoff announcements are doing a good job of illuminating the cultural divides between tech's employee class and founder/VC class that have been simmering for the past couple years," wrote "Luke Metro" on Twitter on Thursday.

But despite the apparent slowdown in tech, the overall job market is still strong, which will likely keep the Fed raising rates into 2023 to disrupt the process of too many dollars chasing too few goods.

The US Bureau of Labor Statistics will release its October jobs report on Friday, the last reading before the Nov 8 midterm elections.

The economy is expected to have added 200,000 jobs last month, down from 263,000 in September but well above the pre-pandemic average.

The unemployment rate is expected to rise slightly, to 3.6 percent from 3.5 percent — but close to a 50-year low.

Reuters contributed to this story.