Massive tech layoffs, slowing growth boost fears of possible recession

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• Geoff Bennett:

  The job cuts in big tech are piling up. Microsoft said today it's laying off 10,000 employees. And Amazon today started a fresh round of job cuts in what's expected to become the largest work force reduction in its 28-year history.

  It all follows recent work force reductions by Twitter, Meta, Lyft, Salesforce, and other tech companies, more than 120,000 tech sector employees laid off in just the last year coming during a period of slowing growth and fears of a possible recession on the horizon.

  Roben Farzad is host of public media's "Full Disclosure" podcast, and he's here to help us sort through this news.

  It's great to see you, friend.

  So, Roben, Amazon, as you well know, went on a hiring spree during the pandemic. Microsoft appears to be bracing for slower revenue growth. What accounts for these latest job cuts?

  Roben Farzad, Host, "Full Disclosure": They all got really ahead of themselves.

  Believe it or not, there was euphoric thinking at the end of 2020. Back then, I mean, let me take you back. We were slathering everything in Purell. We were not touching salad bars. Suddenly, filling in that vacuum in this time of panic, all these tech players were saying, there's a whole new normal. We're going to be working from home exclusively. There will be never-ending demand for cloud services and software.

  And these companies went on a hiring spree as their stocks surged to record highs. You had a trillion-dollar club and the Nasdaq occupied by five or six players. And I think, as a lot of that thinking has kind of come on done, and you realize that the economy matters and cyclicality matters, they're starting to prune at the margins.

  They have massive work forces. Microsoft, I believe, was a quarter-of-a-million people. So, when you see 10,000 or 15,000 workers reduced, that's a big absolute number, but, in the grand scheme of Microsoft, it's kind of — you don't want to sound terrible saying this, but it's kind of pruning for them.

• Geoff Bennett:

  Well, I was going to ask you, I mean, what do these layoffs suggest about the state of the overall industry? Is the big tech boom over?

• Roben Farzad:

  Well, we have seen many players out there saying that we really thought it was going to be far bigger than it was.

  I mean, you mentioned them, Amazon, Microsoft, Meta. Netflix came out last year and said, we're just not having this period of never-ending growth. And that then caused the dominoes to fall in Hollywood and with streaming and with Disney.

  So there's this broad rethink, and it happens in bull markets. It happens in periods of euphoria. I mean, certainly, this rhymes with dot-com boom, because we're seeing the largest number of tech layoffs since 2022 coming after — out of that bust.

  And, look, things happen in clouds. You had the CEO of Salesforce say that: I get a second look at my work force because we are working remotely, and I'm just not seeing the productivity. Maybe I need to bring them back to the office.

  And we haven't faced that full reckoning yet, where people are coming back to the office. So I think a lot of companies are kind of almost looking for an excuse to trim and maybe provide for some margin stability, for Wall Street's sake.

• Geoff Bennett:

  So, is what's happening in the tech sector, this pruning, as you called it, is that set to happen in other parts of the labor market?

• Roben Farzad:

  We — it's uneven. I mean, you have seen it in media. And I think that's just been a constant for so many years. You have seen it in advertising in areas that are cyclical.

  If you talk to any diner owner or any hotel right now, any resort, the airlines, they can't hire people fast enough. And that headline unemployment rate is 3.5 percent. We still have difficult inflation. But there's still a near record number of job openings that many sectors and many employers want to fill.

  And it's not necessarily across the board the case in tech. For example, you really want to hold on to your programmers and engineers. They're really hard to hire, really hard to retain. But when it comes to selling general administrative marketing, you have to reassess that situation constantly, especially if you're publicly traded.

• Geoff Bennett:

  So, in the minute we have left, Roben, what does this all say about the strength of the economy overall? There are people who are concerned about that R-word, recession.

• Roben Farzad:

  Well, I think if you pass by the Treasury Department, I don't know if there are several chimneys, but it's not like they — they send up white smoke when there's an official recession.

  Point is, recession can be a big function of self-fulfilling prophecy. If companies see order pullbacks, if everybody's nervous, they can go ahead and start pruning payrolls accordingly. They don't have to wait for the official capital-R declaration from Washington.

  And, certainly, we're not there yet. It might well happen in 2023 or 2024. It might not happen at all.

• Geoff Bennett:

  Roben Farzad, host of the "Full Disclosure" podcast, great to see you, as always. Thanks so much.

• Roben Farzad:

  Thanks, Geoff.