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This year was one of periodic bloodshed in tech, and the ongoing reverberations of early-pandemic hiring sprees are part of the problem.
First, here are three new stories from The Atlantic:
- Why the GOP doesn’t really want a deal on Ukraine and the border
- Destigmatizing drug use has been a profound mistake.
- Jack Smith’s daring gambit
“Back to the Well”
Earlier this month, just days after Spotify Wrapped gave users a whimsical breakdown of their listening habits this year, the company released a heavier bit of news: It was laying off about 17 percent of its workforce, in its third round of cuts this year. After tech layoffs slowed to a year low in September, they have crept back up as companies look ahead to the new year.
The past 18 months have been filled with setbacks for a sector that had until recently been coasting on a decade-plus of frenzied growth. According to Layoffs.fyi, a site that tracks job losses in tech, nearly 260,000 workers have been laid off so far this year, compared with 165,000 last year. These numbers are particularly notable in a year that has seen a mostly-hot labor market. The good news is that, although tech layoffs are elevated far above where they were in early 2022, these numbers are still way lower than they were at the beginning of the year. In January, some 90,000 workers were laid off across 276 companies, Layoffs.fyi found. Last month, the total was closer to 8,000. But the broader tech environment, especially for start-ups, is brutal: Erin Griffith reported in The New York Times last week that about 3,200 venture-backed companies were wiped out in 2023 (she noted that this is likely an undercount).
The long tail of over-hiring during the flush early days of the pandemic is the main factor driving current layoffs in tech, Roger Lee, the creator of Layoffs.fyi, told me. As my colleague Derek Thompson wrote in January, “When interest rates were low, investors valued growth narratives, and tech companies (or companies that called themselves tech companies) had a monopoly on these narratives … When inflation and interest rates increased, the companies that were making long-term promises were most at risk, and they got clobbered.” Tech firms are still correcting for the reams of workers they hired when it seemed like the party would never end. And now AI is adding to some tech companies’ problems, threatening their core operations. Many companies’ projections got hammered by interest rates remaining higher this year than executives had hoped, so some that have already laid off employees “are going back to the well and making further cuts,” Lee explained.
Some of this timing is cyclical. The end of the year is historically a popular time for layoffs (and, of course, an especially tough time to lose a job). It marks the final stretch of the fiscal year for many organizations; companies are taking stock of that year’s performance, and planning ahead for the next one. In the short term, we may continue to see trends such as cuts continue, Lee said (though he remains a stalwart optimist about the sector overall). Inflation has moderated, and some economists are cautiously predicting that the Federal Reserve may lower rates in 2024; that would make investing in companies cheaper and could spur growth in the tech sector next year, Nick Bunker, the economic-research director at Indeed Hiring Lab, told me. But he doesn’t predict rapid gains in tech hiring, in part because companies may have learned a thing or two from the over-hiring spree of 2021.
Tech executives have been chastened by the blows of the past few years. Many are being more disciplined in their approach to hiring, Lee said, and “they are focusing more on efficiency, rather than growth at all costs.” But there is one notable exception: AI companies. In spite of the challenging funding environment, Lee told me, investors are willing to pour money into AI because of what they see as massive potential. AI companies are still hiring and battling for talent; they are partying like it’s 2021, at least while they can.
Related:
- How did tech become America’s most troubled industry? (From January)
- How ChatGPT will destabilize white-collar work
Dispatches
- The Weekly Planet: The fossil-fuel industry has a rosy idea of its future, Zoë Schlanger writes.
- Up for Debate: Conor Friedersdorf compiles reader stories about social life before technology took over.
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Evening Read
The Joy of Underperforming
By Olga Khazan
For many of us—the vitamin-D-deprived, the sugar-addled, perhaps the suddenly jobless or those dreading family gatherings—’tis the season not so much to be jolly, but just to be “in a season.” The phrase has become a common way of talking yourself through a sudden upheaval, or of explaining that you’ll be doing things a little differently for a while …
Although it may seem cheesy or evasive on its face, the expression is a healthy way to interpret the times when doing it all or pleasing everyone simply isn’t possible. In fact, thinking of life in terms of seasons might just be the best way to stay sane during times of change.
Read the full article.
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P.S.
My colleague Rogé Karma wrote an article this week that helped me think about interest rates in a new way. It’s actually a good thing that the era of cheap borrowing is over, he argues. Though it will be painful in the short term, nonzero interest rates will ultimately mean that “companies looking to boost their stock price will have to win new customers or develop better products instead of relying on financial engineering,” he writes. He breaks down how ZIRP, or “zero interest-rate policy,” helped fuel inequality in the years following the 2008 financial crisis, and he argues that higher rates will lead to a fairer, more sustainable economy. I recommend checking out his piece, and I also recommend saying ZIRP aloud. It is very fun.
— Lora
Katherine Hu contributed to this newsletter.
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