The question that I have is: why are all these big corporations doing synchronized layoffs? Is it about having more people than needed or is it pure greed and expectations that they can easily get away with it because "everyone is doing it"?
I don't think it's really a mystery as to why most tech companies are doing layoffs (also import to note that other industries still have tight labor markets, like oil and gas which happens to be rapidly growing during this downturn).
Tech company growth rates were high during the pandemic so they hired to fuel that growth. Now that growth rates are lower, they have to re-balance their cost structure to match their new forecasted growth. This is happening at every company currently doing layoffs. In Twilio's case, they went from almost 70% year over year growth during the pandemic to currently about 20-30% year over year growth. The same evaporating growth rates is true across the tech industry - Meta is actually seeing revenue decline year over year, Google has seen growth shrink to just 1%. Even more telling are operating margins which are evaporating very quickly as growth stalls - Google's operating margins are down 17% year over year.
No one has a crystal ball, so companies hire during high growth periods to capitalize on growth, and lay off during low growth periods to re-balance their cost structure towards profit. This is true of many industries - you see the same effects play out in the boom and bust cycle of industries like O&G - which are currently hiring and not too long ago were laying off as well. People want to frame lay offs as de facto failure, but really it is just companies responding to market conditions - no different then companies hiring when growth is high.
It's a good time to do it; copycat layoffs (The Board: "everyone is doing layoffs, why aren't we?") and it's a way to give a short term boost to the stock price - at least for publicly traded companies - when technology earnings are mixed or poor.
It's because the fundamental economics of nearly the entire sector don't make sense.
I predicted there would be mass layoffs in tech right like this last year, and more specifically predicted 6 months ago that we'd be seeing basically what we're seeing as far as layoffs.
With rising rates investors are asking companies to show a clear path towards profitability. Most of these companies are losing more money each quarter and industry wide this has to stop.
For the larger profitable companies it's likely because they realize a huge amount of their revenue is coming from these companies that don't make money.
While I'll be the first to criticize companies for working to remove power from workers, what we're seeing is simply investors waking up to the economic reality that growth without profits is not sustainable.
The most frustrating part of all of these layoffs is that it seems more or less understood that if the fed lowers rates, we'll be back to irresponsible hiring. This belief that there is a sing "right strategy" for the given economic conditions completely ignores switching costs, both for individuals (whose lives are upended) but also for companies (imo the coordination overheard of hypergrowth likely means that companies are less productive in the short term).
Cover - layoffs make the company look bad. Laying off when you are the only company doing so makes you look even worse both to the public and investors.
The question that I have is: why are all these big corporations doing synchronized layoffs? Is it about having more people than needed or is it pure greed and expectations that they can easily get away with it because "everyone is doing it"?