The widespread tech layoffs over the past few months, and in January and February 2023 alone, have been causing concern for some. Is it a sign of a possible recession and economic avalanche that will see the unemployment rate skyrocket in different countries?
I am not an economist, so this is just more observational. But, I don’t believe the widespread tech exodus we are currently witnessing is symptomatic of an economic storm battering down on the tech sector. It’s a correction.
That’s not to say that the economy in many countries isn’t going down the toilet and, inflation despite peaking in many places still being stubbornly high. But, we are not quite at the point where high interest rates and constrained economic circumstances are causing businesses to start laying people off en masse.
During the pandemic, when everyone was forced inside, and everyone could work remotely, tech companies went on a hiring spree. Apps like Zoom saw unprecedented growth. They needed to hire more people to tackle the scale. The same thing happened with Netflix and other companies. All of the big ones hired a lot. Google, in particular, has been on a hiring spree forever.
However, people didn’t want to be stuck inside once the pandemic restrictions were lifted. The shift to virtual changed to physical. Somehow companies like Meta and Zoom thought pandemic hermit living would continue, and so would their profits.
It’s a classic case of over-capitalisation. Companies expanded their workforce too quickly and too much. Mark Zuckerberg even admitted so much himself last year that he got it wrong.
Despite big tech laying people off, smaller, better-run companies are still hiring. The ones that didn’t overextend themselves, naively believing the good times of the pandemic and stupidly high valuations would continue to soar.
It’s one of the reasons that I closed my LinkedIn. My feed was doom and gloom; it was beginning to affect me, making me fear what 2023 would hold for me. It doesn’t help when you have a lot of people from these big tech companies as connections or followers talking about their last day or worse.
The reality is we aren’t at the point where layoffs are happening because of recession fears. That’s not to say it’s not already happening, but it’s not the reason for the widespread layoffs we are currently seeing. Just some unfortunate fat-cutting from bloated big tech companies that have always operated under the illusion they are too big to fail.