Why Widespread Tech Layoffs Keep Happening Despite A Strong U.S. Economy

Summary

In 2024, the tech industry faces widespread layoffs, with companies like Cloudflare, LinkedIn, Qualcomm, Google, Amazon, and Snap downsizing. Despite a seemingly strong US economy, the tech boom during the Covid-19 pandemic led to overexpansion and hiring sprees. As the economy shifts towards profitability over growth, tech companies are cutting jobs to streamline operations. AI investments are on the rise, with Meta aiming to build AGI, but this technology also contributes to job cuts. The tech industry's image of high salaries and perks is tarnished, and layoffs are becoming the new normal.

Takeaways

• 📈 Tech industry layoffs are widespread, with companies like LinkedIn, Qualcomm, Google, Amazon, and Snap announcing significant cuts.
• 🌐 Layoffs are not limited to tech; sectors like healthcare, banking, and media are also affected.
• 📱 The start of 2024 continues the trend of layoffs that began in the second half of 2022, peaking in 2023.
• 💼 The tech boom during the Covid-19 pandemic led to massive hiring, but as the economy shifted, companies began to downsize.
• 📉 Rising interest rates and a focus on profitability over growth have contributed to the layoffs.
• 🤖 AI and automation are playing a role in job displacement, with companies investing in technology that can replace human labor.
• 📊 There's a significant increase in job postings and demand for AI-related positions, suggesting a shift towards tech-focused roles.
• 📉 Tech stocks have rebounded, with companies that conducted layoffs seeing an increase in their stock prices.
• 💰 The wealth of tech billionaires increased significantly in 2023, highlighting a disparity between corporate profits and job security.
• 🚨 The perception of tech jobs as secure and high-paying is changing, with layoffs becoming more common and public.
• 🔍 There is debate among experts whether the tech layoffs will impact non-tech sectors, but so far, the overall job market remains strong.

Q & A

What event does the viral video in the transcript describe?

The viral video describes the real-time layoff of Brittany Pietsch, a former employee of Cloudflare, which was posted online in January 2024 and gained significant attention.

Why have tech companies been laying off large numbers of employees in 2023 and 2024?

Tech companies have been laying off employees due to increased interest rates, reduced access to capital, and a shift in priorities from growth to profitability. The rise of AI and automation has also contributed to this trend.

What impact did the rise in interest rates have on tech companies?

The rise in interest rates made capital more expensive and less accessible, forcing tech companies to reevaluate their headcount and focus more on profitability rather than growth. This led to widespread layoffs.

How did the Covid-19 pandemic initially impact the tech industry?

The Covid-19 pandemic initially boosted the tech industry, leading to a hiring spree as people relied more on technology while confined to their homes. Major tech companies expanded significantly, adding trillions in value and millions of employees.

How is artificial intelligence (AI) contributing to the layoffs in tech companies?

AI is contributing to tech layoffs as companies prioritize automation and efficiency. Jobs traditionally done by employees are increasingly being handled by AI, especially in areas like data analysis, marketing, and customer service.

What are companies like Meta focusing on in terms of AI development?

Meta is focusing on building Artificial General Intelligence (AGI), with plans to open-source the technology responsibly and integrate it into everyday life.

What shift in focus are tech investors now demanding from companies?

Tech investors are shifting their focus from growth to profitability. They now reward companies that downsize and become more efficient, rather than those that rapidly expand.

How have tech companies like Twitter shown that fewer employees can still keep operations running?

Twitter, after massive layoffs in which 80% of its workforce left or was fired, demonstrated that the platform could still function efficiently, showing that many tech companies may have been overstaffed.

Why are layoffs becoming more common even in a strong US economy?

Layoffs are becoming more common as companies streamline operations to remain profitable in the face of rising costs, shifting priorities, and increasing automation, despite the broader economy showing strong job growth and low unemployment.

What other industries outside of tech are seeing widespread layoffs in 2024?

Industries such as healthcare, banking, media, and logistics are also experiencing widespread layoffs in 2024, with companies like UPS, Paramount, NBC, and Citigroup cutting thousands of jobs.

Outlines

00:00

😟 Viral Layoff Video Sparks a New Trend

A viral video posted by Brittany Pietsch, a former Cloudflare employee, shows a person being laid off in real time, sparking a new trend of sharing layoff experiences online. The tech industry has seen widespread layoffs, especially in companies like LinkedIn, Qualcomm, Google, and Amazon. The trend is becoming common as economic struggles in 2023 continue into 2024, with companies like Cloudflare joining the downsizing movement.

05:02

📉 Tech Industry's Shift Towards Downsizing

Layoffs in the tech industry are part of a broader shift, with companies like Amazon, Google, and Qualcomm focusing on profitability over growth. Interest rates rising and the tightening of access to capital have forced companies to reassess their massive growth from the pandemic years. This led to mass layoffs as the headcount growth didn't translate into profitability, reflecting a stark contrast from the booming 2020 period.

10:03

🤖 AI and Its Growing Influence on Jobs

Artificial Intelligence (AI) has become a major focus for tech companies, with CEOs like Mark Zuckerberg of Meta doubling down on AI investments. Job postings mentioning generative AI have surged, but the demand for AI professionals far exceeds the supply. AI is expected to create new jobs, but it will also automate certain roles, forcing companies to lay off workers skilled in older technologies to make room for AI specialists.

⚡ Automation and Efficiency in Tech Layoffs

AI and automation are reshaping the tech industry, making companies more efficient while reducing the need for large workforces. Businesses are prioritizing AI-driven solutions over hiring expensive talent. This shift is particularly noticeable in tech, where companies are replacing workers with AI to achieve faster results and leaner operations. However, experts suggest that AI hasn't yet had a significant impact on overall tech layoffs.

📊 Tech Layoffs vs. Market Performance

Despite the massive layoffs, tech stocks have soared, with the NASDAQ up 43% in 2023. Meta saw a huge increase in its stock value, boosting the wealth of tech billionaires by billions. Investors are favoring profitability over growth, rewarding companies that have laid off employees to become leaner. This trend indicates that layoffs may become the new normal in tech, as companies prioritize efficiency.

🏢 Widespread Layoffs Across Industries

Mass layoffs are not limited to the tech industry. UPS, Paramount, NBC, and various other companies in media, healthcare, and banking have also announced significant job cuts. Despite these headlines, the labor market in the U.S. remains strong, with job creation far exceeding expectations. However, experts remain divided on whether layoffs from tech will trickle down to other sectors.

Keywords

💡Cloudflare

Cloudflare is a San Francisco-based tech company that provides content delivery network services, DDoS mitigation, and domain name server services. In the video's context, it is mentioned as a company that has decided to part ways with an employee, indicating a layoff. This example illustrates the impact of the tech industry's layoffs on individual employees and sets the stage for discussing broader industry trends.

💡layoffs

Layoffs refer to the termination of employment for a group of workers. The video script discusses widespread layoffs in the tech industry, with companies like LinkedIn, Qualcomm, Google, Amazon, and Snap making headlines for downsizing. The term is central to the video's theme, which explores the reasons behind and the implications of these job cuts.

💡hardware engineering

Hardware engineering is a branch of engineering that deals with the design, development, and testing of computer hardware and other physical technologies. The script mentions that hardware engineering units are among those affected by layoffs, highlighting that the impact of job cuts is not limited to software and services but extends to various tech sectors.

💡ad sales

Ad sales refer to the process of selling advertising space or time, typically in media. The script indicates that ad sales are also affected by the layoffs, suggesting that the tech industry's downturn is impacting not only technical roles but also commercial functions within companies.

💡Covid-19 pandemic

The Covid-19 pandemic is a global health crisis caused by the novel coronavirus. The video script contrasts the tech industry's boom during the pandemic's early stages with the subsequent layoffs, illustrating how economic conditions can shift dramatically and affect employment in the tech sector.

💡interest rates

Interest rates are the cost of borrowing money and the return on investment. The script discusses how the Federal Reserve's decision to cut interest rates to near zero during the pandemic boosted tech stocks and enabled the industry's expansion. However, as interest rates went up, companies faced tighter capital access, leading to layoffs.

💡Elon Musk

Elon Musk is the CEO of Tesla and SpaceX and has a significant influence on tech and business trends. The script mentions Musk in the context of Twitter's layoffs, suggesting that his actions have set a precedent for other companies to follow in streamlining their workforce to become leaner and more efficient.

💡artificial intelligence (AI)

Artificial intelligence refers to the simulation of human intelligence in machines that are programmed to think like humans and mimic their actions. The video discusses how AI is being invested in heavily by tech CEOs, with Mark Zuckerberg's announcement of plans to build AGI being a prime example. AI is presented as a driver of both job creation and automation, impacting the future of work in the tech industry.

💡generative AI

Generative AI refers to a subset of AI that can create new content, such as text, images, or music, based on existing data. The script mentions a significant increase in job postings and demand for generative AI, indicating a growing trend in the tech industry towards utilizing AI for content creation and other applications.

💡NASDAQ

NASDAQ is a stock exchange platform for trading securities, including stocks of tech companies. The script notes that the NASDAQ climbed to 43% in 2023, indicating a positive performance for tech stocks despite widespread layoffs. This highlights the complex relationship between company performance, stock market reactions, and employment trends.

💡Paramount NBC Sports Illustrated The Los Angeles Times

These are media companies that, according to the script, have announced major job cuts in early 2024. This keyword illustrates that layoffs are not confined to the tech industry but are also affecting other sectors like media, suggesting a broader economic trend.

Highlights

The video posted by Brittany Pietsch, a former Cloudflare employee, gained massive attention and may have kicked off a new genre of 'watch this person get laid off in real time' videos.

Layoffs in the tech industry continued into early 2024, following a tough 2023, with companies like LinkedIn, Qualcomm, Google, Amazon, and Snap all implementing workforce reductions.

The shift towards profitability over growth has driven tech layoffs, as companies that previously focused on expansion are now prioritizing lean operations and cost-cutting.

AI's rapid evolution is significantly impacting the job market, as companies are starting to prioritize AI investments over maintaining large headcounts.

Meta CEO Mark Zuckerberg announced a major focus on building Artificial General Intelligence (AGI) in early 2024, showing a strong commitment to AI advancements.

Generative AI job postings surged by 500%, and job seeker interest increased by 6,000%, highlighting a substantial mismatch between AI talent supply and demand.

Companies are trimming traditional roles to make way for more AI-centric positions, indicating a paradigm shift in how work is being structured in the tech sector.

AI is being used to automate tasks previously performed by high-salary employees, further accelerating workforce reductions in technology and other industries.

The rise of social media platforms like TikTok and YouTube Shorts has made people more comfortable with sharing personal experiences of layoffs, which could destigmatize the process.

Despite widespread layoffs, the tech-heavy NASDAQ surged by 43% in 2023, showing that investors are rewarding profitability even amidst job cuts.

Big tech companies’ focus on efficiency and leaner operations has translated to record-high stock prices, further motivating them to continue reducing headcounts.

The recent wave of layoffs is not limited to the tech industry, with sectors like media, healthcare, and banking also announcing major job cuts.

Job cuts in non-tech sectors like UPS, media giants such as Paramount, and financial institutions like Citigroup suggest that the trend is spreading beyond just technology.

The US economy added 353,000 jobs in January 2024, despite ongoing layoffs, highlighting the complexity and contradictions of the current labor market.

Experts are divided on whether the tech layoffs will trickle down to the broader economy, but the continued profitability and strong job numbers suggest resilience for now.

Despite the ongoing layoffs, the overall layoff rate remains near historic lows, indicating that tech layoffs may be an isolated phenomenon rather than an indicator of a broader economic slowdown.

Transcripts

Unknown: Hi, Bernie. Hi. Thanks for meeting with me. And Rosie.

We have an important meeting today. We finished our

evaluations of 2023 performance. This is where you have not met

Cloudflare expectations for performance. We've decided to

part ways with you. Yeah,

I'm gonna stop right there.

This is a viral video posted by Brittany Pietsch, a former

employee of CloudFlare, a San Francisco based tech company.

The video posted on January 2024, and got so much attention

that it may have kicked off a new sub genre of viral video

watch this person get laid off in real time. The tech industry

is again seeing widespread layoffs after a rough 2023

LinkedIn just

laid off nearly 700 employees. Qualcomm is planning to cut more

than 1200 jobs Google

Amazon and Snap are among the companies continuing to downsize

in the start of 2024 seems no different as layoff

announcements, especially in the tech industry continue to make

headlines.

Units affected they also include hardware engineering, ad sales

so far last night CEO Sundar Pichai told his workforce to

expect more cuts

Kate Rooney: and Amazon spokesperson did confirm those

layoffs ahead of prime and prime video and MGM saying in that

memo that the company is making some of the cuts to prioritize

investments for the long term. layoffs

Unknown: are also plaguing industries like healthcare,

banking and media, whoever the tech industry is the one that's

been dominating the headlines. This

Devyn Rafols-Nunez: layoff and everything that's happened in

tech, I think is pretty eye opening. You know, like, you can

have your dream job, you can have your Oh, it's my dream to

work for Microsoft or it's my dream to work for AWS. And you

get there and you realize, huh, okay, it's just like any other

job. It's a great place to be. There's a lot of great perks,

but at the end of the day, you can get rid of you like that

Unknown: the layoffs to the start of 2024 signal a dramatic

shift in the tech industry, we're going to continue to see

layoffs happen as the future of work has changed as the future

of technology has changed. And as investors the appetite for

risk and growth versus profitability has dramatically

changed as well.

So why are big tech companies and other industries laying off

10s of 1000s of workers at a time when the US economy looks

strong on paper?

The start of the Covid 19 pandemic was a dire economic

event, at least at first. The tech industry though, boomed in

2020, Tech's top seven companies added $3.4 trillion dollars in

value. The feds emergency moves to bolster the pandemic hit

economy, like cutting interest rates to near zero helped boost

tech stocks. This move helped the tech industry to expand and

went on a hiring spree as people were confined to home. Amazon

added the most number of employees during this golden

period peaking at 1.6 million employees in 2021. If

you rewind before the layoffs, all the tech companies were

really putting an emphasis on growth. And so capital was

really cheap, you know, so you could get loans, you could get

money access to capital was really affordable. And then you

see as interest rates went up, and you start to see that that

growth in headcount didn't translate to growth and

profitability. And access to capital became quite a bit

tighter, you saw many companies start to hit the panic button.

And so we see saw these 1000s and 1000s of people get laid off

all at once. And that was quite a shocked 80%

of Twitter either left or quit or was pushed out laid off

whatever you want to call it. And yet the website still runs.

Do you think people are looking at Elon Musk and thinking, You

know what, we really need all these people.

I do get Elon Musk credit for this for kicking off and making

this acceptable Twitter, but a lot of the big companies decided

to get lean and efficient. And you know, this is where you kind

of start to see the incredible leverage of what these tech

platforms really have, which is they didn't need those people,

right? They were hoarding the talent. It was an option that

and it was a cheap one for them. Yeah,

I asked every tech CEO, do you take inspiration for what Elon

does? And they'll say on the record? No, we don't we would

never want to do that. But, you know, in the group chats,

they're all like, wow, that was an amazing move.

The artificial intelligence hype of 2023 is starting to have real

world effects in 2024 major tech CEOs are doubling down their

investments in AI. In January 2024, meta CEO Mark Zuckerberg

announced his plans to build an artificial general intelligence

known as AGI everyone.

Today I'm bringing Meta's AI research efforts closer together

to support our long term goals. Building general intelligence,

open sourcing it responsibly, and making it available and

useful to everyone

in all of our daily lives. All this investment in creating AI

jobs, but at the end spends of others, the recent report from

indeed shows that the number of job posts containing Gen AI

terms has been surging.

So there's about a 500% increase in the number of jobs that

mentioned generative AI, there's about a 6,000% increase in the

demand from job seekers for these jobs. But there still is,

I think, a mismatch the other way, and that the total amount

of demand for AI talent far outstrips the number of AI

professionals, every company

in every industry is trying to figure out how to use AI in

everything they do. I mean, AI is going to create a lot more

jobs as well. But at the same time, I would say that there

will be jobs that will be automated. So

you the AI has already hit the business effectively. Oh,

absolutely.

Absolutely. Especially in the tech sector. I mean, they've

been talking about it for years. Now, the fact that you have more

companies moving towards artificial intelligence, and

they're looking at the fact that as opposed to paying somebody

200 $300,000 a year to do the job, I can actually use

artificial intelligence to do the job that they used to be

able to do this

AI thing is real is not going away, and they can't have people

holding them back. And so what they've been doing over the past

year is finding places within the organization that they can

trim so that they can get to a place where they're shipping

faster, take managers out, and then engineers who are skilled

for a previous generation of technology, they're also leaving

to make room for people who are more skilled for artificial

intelligence,

AI is definitely playing a role in the layoffs that we're

seeing. Automation has increased efficiency for some of the

workers who are able to utilize AI to make marketing decisions

to analyze data to serve customers more efficiently and

effectively. So AI is a paradigm shift that is changing the way

people work and changing the priorities of tech companies.

Right now, I don't see that there's a big impact from AI in

these tech layoffs. Some businesses have maybe cited that

they're trying to, you know, shift priorities, and they're

letting some employees go to focus more energy on some of

these generative AI tools. But I think it's important to say

that, that's very different than saying that companies are, well,

we can let people go now because you know, general AI, and all

these tools are taking jobs.

The tech industry used to have this shiny image of having big

salaries, and unlimited perks. But the recent tech layoff

stories have completely shattered that image.

Devyn Rafols-Nunez: I really don't have any regrets about

posting it or what's happened. I think the bigger picture is that

I've been able to be a voice for people who have gone through

something similar. You know, the stories that I've received are

people who were laid off 2030 years ago, and they still

remember to this day, how that made them feel, and it did not

make them feel good. And I think that we should shed light on

stuff like that. So we can make a change, otherwise nothing will

change. In

Unknown: my experience, the public sharing of things like

one's layoff I think, is partially due to the fact of the

rise of social media such as tick tock, even YouTube shorts,

people are becoming much more comfortable with sharing their

experiences. And oftentimes when layoffs happen, people feel

shame when they are being laid off. In reality, though,

oftentimes if people are being laid off, it's a failure of

leadership of that company.

Tech companies that conducted widespread layoffs have seen a

bounce in their stocks. The tech heavy NASDAQ climbed to 43% in

2023. Its best year since 2020. Meta was the biggest gainer

among big tech surging over 194%. The tech stock boom also

helps boost the wealth of tech billionaires, the super rich

CEOs saw their wealth grow by 48%, or $658 billion in 2023.

Let's

hard particularly for a company like Google, which over the past

25 years hasn't gone through a moment like this. But you know,

we've always deeply cared about our employees. We also

note the sign of negative developments that are in some

sense a sign of positive developments of a greater demand

for the services and automation and activity improvements. Now

we see the stock market reacted quite favorably to this round of

layoffs. We see these record stock prices for a lot of these

tech companies. And so the stock price the investors really

favored profitability, really favored this lean year that

these tech companies had. And so instead of rewarding the growth

that we saw in them all pursue years ago, they're now rewarding

profit. And so the layoffs have continued. People have become

used to them, and regrettably, and sadly, it seems that the

layoffs is going to be the new normal.

data suggests an influx of layoffs in the tech industry,

starting from the second half of two At 22 and peaking and 2023

some non tech sectors are also seeing widespread layoffs. A

prime example is ups the courier giant raised eyebrows by

announcing 12,000 job cuts in January. The media industry

isn't immune to layoffs either. And 2023 to industry shed over

20,000 jobs in 2024. It looks no different as big names like

Paramount NBC Sports Illustrated The Los Angeles Times all have

announced major job cuts in early 2024. The banking sector

is also not shying away from cutting jobs, Citigroup, Morgan

Stanley Deutsche Bank, or some of the big names that have

already announced their layoff plans for 2024. It's worth

noting that even though these mass layoffs continue dominating

headlines, labor markets still seem strong. The US economy

added 353,000 jobs in January, much better than the Dow Jones

estimate for 185,000 jobs. But the unemployment rate held at

3.7%. Against the forecasts for 3.8%. Experts are divided on

whether the recent tech layoffs would trickle down to non tech

sectors.

Looking at the current job market right now, there's no

evidence that we're going to see any trickling obviously, you

know, kind of the jury's still out. It's still early to tell.

But it's interesting as we look back, and 2023 2023 was a year

of a lot of layoffs in the tech industry. And we didn't see any

of that trickle out. Even within the tech industry, which is

usually the government usually defines it as the information

sector. We didn't see a very high layoff rate. So we saw a

lot of companies announcing layoffs. But those companies

kind of carried an outsized share of the media, because then

once we rolled it all up, there was maybe about 1% of employment

that was being laid off. So really, ultimately, the overall

rate of people losing jobs to layoffs, remains near historic

lows. It

hasn't yet trickled down to the rest of the economy as we're

seeing the stock prices really high unemployment fairly low.

But at some point, if this continues, both companies and

individuals are going to have to cut back spending and that has

consequences that reaches far beyond the tech industry.