The wave of layoffs in tech that continued to mount this week has felt like a shocking and sharp turnabout for an industry that stood on top of the world just a year ago.
\nBe smart:\u00a0Tech was never immune from forces in the broader economy, and Silicon Valley has always followed a boom-bust rhythm. But the most recent boom ran so long, many forgot it would have to end someday.
\nDriving the news: Amazon said Wednesday it will\u00a0cut a total of 18,000 jobs, including some announced last year as well as new reductions to its retail and HR teams, among others.
\n\uf0b7Salesforce is\u00a0laying off 10% of staff, saying it over-hired during the pandemic.
\n\uf0b7StitchFix on Thursday said it will\u00a0cut 20% of salaried staff.
\n\uf0b7Across the industry last year, more than 1,000 tech companies laid off more than 150,000 people, per\u00a0Layoffs.fyi.
\nThe big picture:\u00a0Tech’s reputation for driving economic growth has always been founded on its ability to deliver productivity gains.
\n\uf0b7The industry also grew by grabbing market share from a host of consumer and business segments that have moved from analog to digital.
\n\uf0b7The financial crisis of 2008-9 ushered in an easy-money era in which zero interest rates pushed seas of capital into tech.
\n\uf0b7The pandemic’s arrival brought some sectors to a standstill \u2014 but strengthened tech firms, who saw demand spike.
\n“It\u2019s been a more than decade-long party,”\u00a0said Margaret O’Mara, a University of Washington professor who studies the history of the technology industry. “It\u2019s just extraordinary how long this boom has been.”
\nThere was an assumption, O’Mara says, that pandemic-related behavior changes, such as the shift to remote work and buying groceries online, would just continue.
\nThat led many tech\u00a0companies\u00a0to go on a hiring spree\u00a0during the pandemic. The parent companies of both Facebook and Google, for example, grew more than 20 percent last year, while other large tech companies have doubled since before the pandemic.
\nThen inflation hit,\u00a0the Fed raised interest rates and the economy softened dramatically \u2014 just as many people were returning to pre-pandemic methods of working and shopping. Tech, for all its vast scale and high profit margins, was never going to be immune from that kind of shift.
\n\uf0b7Online advertising has been hit particularly hard, with Google, Meta, Microsoft and others all noting a pronounced slowdown beginning mid-2022. Many tech companies\u00a0started by slowing or freezing hiring, but shifted quickly to layoffs once the broader downturn was clear.
\nThe chip sector,\u00a0whose products had been in short supply, is now having to deal with a glut.<\/p>\n