On Monday, Spotify became the latest tech giant to shrink its staff, announcing it would cut ~600 workers, or 6% of its workforce.
That brings the total number of tech layoffs in 2023 to ~57k, following ~159k in 2022, according to Layoffs.fyi. The Great Reduction is happening in a labor market that, for the most part, is humming along just fine.
Why is it 2023 for most industries and 2000 all over again for tech?
For one thing…
… tech companies hired a ton of employees from 2020 to early 2022, when it seemed Americans might never leave their homes again (except to tour open houses and unsuccessfully bid on other homes).
- Alphabet said it would slash 12k jobs on Friday after adding 30k+ jobs in 2022, per the Wall Street Journal.
- Microsoft said it would cut ~10k jobs last week after adding 40k in the last fiscal year.
Basically, tech companies are backing away from staff counts they believed were necessary for a tech-centric future that hasn’t come to fruition.
Then there are the Fed’s interest rate hikes
As you likely know (especially if you kept trying to buy a house), borrowing has gotten more expensive. Without cheap money, investors are less willing to subsidize long runways and pie-in-the-sky projects, according to The New York Times.
Tech companies are shifting their focus accordingly to making money instead of chasing long-term growth. And terribly enough, investors have liked these recent layoffs:
- Spotify’s stock jumped 5% after its layoff announcement Monday before cooling off in the afternoon. Alphabet and Wayfair experienced similar spikes after layoff announcements.
Is it all vibes then? The Atlantic’s Derek Thompson doesn’t rule it out, writing that one explanation for the layoffs could be tech CEOs mimicking each other to get a brief high from the market.