Great Resignation to Great Layoffs: Does the recent tech layoffs signal an industry downturn?

In December last year, a poll by jobs portal Indeed revealed that one out of four Singapore workers are planning to leave their current employer in the first half of 2022.

The survey that polled 1,002 workers in Singapore aged between 16 and 55, also found that nearly half were unsure if they would stay in the current job for the next six months.

According to Indeed, these suggested a ‘Great Resignation’ trend in 2022, a phenomenon similar to other first-world countries like the United States and Europe, where workers’ needs are changed by the pandemic.

However, it looks like the recent wave of tech layoffs have shifted the job trend to ‘Great Layoffs’ instead.

Blame the bad economy

Basically, rampant inflation, coupled with fear of stagflation and recession, has led to a shift towards belt-tightening now.

Tech companies are often viewed as the bellweather for the broader economy. Investors in tech need a relatively high-risk tolerance, as these companies — especially startups — can take a long time to turn a profit.

Companies in tech are often willing to forgo profitability for growth, when the economy is expanding.

But that has not been the case lately with supply-chain interruptions, the Russia-Ukraine war, crashing stock markets and other red-alert economic factors. It has gotten pretty tricky to a point that Tesla founder and CEO Elon Musk told his employees that he has a “super bad feeling” about the economy.

It turned into a ‘Great Layoff’ last month, when firing “exploded“. According to layoff tracker Layoffs.fyi, job cut announcements in tech in May were 10 times the number in the first four months of the year. Specifically, 17,000 tech workers were laid off in May alone.

Tech and crypto firms are feeling the heat

The most recent layoff was crypto giant Coinbase, laying off about 1,100 employees in response to a volatile crypto market.

According to Bloomberg, Coinbase had hired aggressively in recent years, with its workforce ballooning by about 1,200 employees this year. Now, the company even plans to reduce its workforce by 18 per cent after coming out of a long winter in which crypto value has dipped.

CEO Brian Armstrong warned that “we appear to be entering a recession after a 10-plus year economic boom.” He admitted that the publicly traded company, which has a market value of more than US$13 billion, “grew too quickly” in 2021 as it scaled up to take advantage of the crypto craze.

The move by Coinbase came a day after cryptocurrency company BlockFi, which had grown nearly sixfold in 2021, announced it was laying off about 250 people.

In May, Microsoft told Bloomberg that it was slowing hiring for its Office, Windows, and Teams groups to better prepare itself for the coming fiscal year and contend with the current economic environment.

The tech giant reported strong Q3 earnings, with a 26 per cent year-over-year increase in cloud revenue, but in early June, the company revised its Q4 revenue and earnings guidance downward, citing the impact of foreign exchange fluctuations.

Paypal and Meta on the other hand, have publicly announced hiring freezes, while Snap — the parent company of Snapchat — confirmed it is slowing hiring as it misses revenue targets.

Meanwhile, Spotify, the world’s largest online streaming service, has been on a spending spree, plowing cash into its podcast division in an effort to dive deeper into the higher margin business. Regardless, it is not immune to the current economic backdrop.

According to Bloomberg, Spotify will cut its hiring plans back by 25 per cent, meaning the company will not stop hiring new employees, but will bring on fewer workers than originally expected in the year ahead.

Last month, Netflix also confirmed it would cut about 150 positions of the streaming giant’s 11,000-workforce in an effort to reduce costs amid slowing revenue growth.

“These changes are primarily driven by business needs rather than individual performance, which makes them especially tough as none of us want to say goodbye to such great colleagues,” a Netflix spokesperson said in a statement.

Tesla, which employs over 100,000 staff will also be cutting down its staff. In Singapore, the electric vehicle manufacturer has already laid off its country manager, with Musk also telling employees to return to work in office or work elsewhere.

In May, Twitter also froze hiring and said it would retrieve some job offers ahead of a buyout offer from Musk. The social media company also scaled back on costs such as travel, consulting, and marketing, according to the memo. 

Closer to home, Singapore-based e-commerce giant arm Shopee announced last week that it is laying off some employees in its food delivery ShopeeFood and online payment ShopeePay teams. It’s not only regional operations that would feel the brunt — Shopee also said that it will also cut staff in Mexico, Argentina and Chile, as well as a cross-border team supporting the Spanish market.

Sea Limited, the parent company of Shopee, plans to also close its early-stage pilot in Spain, after announcing plans to launch online sales in the country last October.

For this year so far, tech companies worldwide have laid off a total of 35,000 workers, according to Layoffs.fyi.

LinkedIn News editor Andrew Murfett said in a blog posting, “This is the most significant number of lost jobs in the sector since May 2020, at the height of the pandemic. Much of the tumult has occurred in venture capital-backed firms as investors abandon risky bets and seek immediate returns.”

Should we be concerned?

No doubt there is a lot of anxiety right about the labour market at this point.

However, it’s not all doom and gloom. Its effect on Singapore’s job market is limited as there continues to be a strong hiring demand for IT professionals.

A quick check on mycareersfuture revealed that there were about 9,000 permanent IT job listings. In particular, some roles that are high in demand include software developers, business analytics professionals, data scientists, and project managers.

Recruitment agencies also expect firms to ramp up tech hiring in the next one to two years, with pay jumps of between 15 per cent and 30 per cent, up from 10 per cent to 15 per cent.

A recent report by The Straits Times revealed that salaries for tech roles in Singapore are set to rise, and particularly those with unique skills may be offered “exorbitant” pay packages.

To add on, the tech layoffs is not necessarily a bad thing. As experienced tech professionals leave tech firms, they either start their own companies or join firms in other sectors, which will help accelerate innovation either way.  

Featured Image Credit: Reuters / Cripto Tendencia / LightRocket via Getty Images / Tesla