Meanwhile, Twitter’s long-running bad romance with Elon Musk is tangled up in court and the outcome is uncertain, a point the company made when it reported disappointing numbers on Friday. Amazon is facing a growing labor movement, and Facebook is facing a new advertising climate. Regulators at home and abroad threaten to crack down on the industry as a whole.
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Social media company Snap’s shares fell nearly 40 percent on Friday, a day after it reported worse-than-expected revenue growth and declined to provide a forecast for future profits due to “uncertainties related to the operating environment.” Netflix this week reiterated factors such as “weak economic growth” as it lost subscribers.
And analysts predict that next week’s figures released by Amazon, Microsoft, Google, Facebook and Apple could be the strongest signal yet on how these companies will approach the coming months. Already this week, Bloomberg reported a decline in hiring and spending at Apple — a measure of how much consumers are willing to spend — news that helped lower the major stock market indices.
“The market is looking at it, and basically the logic is, ‘oh crap, if they’re doing this, what about the ones who aren’t as strong?’ ” said Tom Essaye, president of Sevens Report Research. “‘And what do they see coming that everyone else doesn’t?’ “
Meta spokesman Tracy Clayton said the company will continue to make changes in some parts of its business because of the larger economic environment. Apple and Amazon did not respond to requests for comment. Google, Twitter and Snap declined to comment. Amazon founder Jeff Bezos owns The Washington Post.
Tech’s hiring freeze and pessimistic forecasts stand in stark contrast to the companies’ traditionally bulletproof reputation for unfettered growth, raising concerns from some economists and Wall Street investors. Over the past decade, tech companies have skyrocketed, hiring tens of thousands of workers and amassing huge cash hoards through ever-expanding profits. The share prices of companies such as Amazon, Microsoft, Apple and Google continued to march skyward, dominating stock exchanges and making many investors rich.
As some of the most valuable companies in the world, they also have a large influence on perceptions of the economy, in part due to the nature of their business, which relies on consumer clicks and spending. Any drop in demand for toilet paper sold by Amazon, Teslas or iPhones, as well as fewer ads bought on Instagram or Google searches to try to sell people new shoes or headphones, is sure to cause tremors in other spheres.
Technology has signaled to investors for months that boom times are coming to an end — Amazon was one of the first tech giants to warn earlier this year that it had hired too many warehouse workers and had overbuilt to anticipate higher customer demand that instead began to slow as coronavirus lockdowns were lifted and habits moved out of pandemic modes.
Google’s CEO says the company will slow hiring amid economic conditions
Tesla reported better-than-expected earnings on Wednesday, but even during that call, CEO Elon Musk and other executives were grilled by analysts on the topic of a potential economic slowdown. Musk said earlier this summer that he had a “super bad feeling” about the economy and expected the automaker to cut its workforce by about 10 percent.
“We need to be more entrepreneurial, work with more urgency, sharper focus and more hunger than we have shown on sunnier days,” Sundar Pichai, CEO of Google parent Alphabet, said in a memo to employees last week. The company will cut its hectic hiring pace and new hires will be concentrated in engineering and other technical roles, he said. “Making the company more efficient is up to all of us.”
Earlier this year, Facebook reported for the first time a decline in daily users, which, combined with increased competition, lower revenue forecasts and obstacles in its advertising business, sent its stock prices plummeting. The company’s stock is now down 50 percent for the year. And Facebook last week asked its engineering leaders to weed out low-performing employees in the face of a downturn. “If a direct report goes above and beyond or underperforms, they’re not the ones we need; they are failing this company,” the company’s chief engineer wrote in a memo.
Microsoft recently removed open job postings from the web, Bloomberg reported.
It could become a self-fulfilling prophecy, market experts say, if other companies immediately respond to Big Tech’s crackdown by tightening their own operations. But the moves aren’t cut and dry — many feel tech is preparing for an economic downturn, and aren’t panicking over declining business metrics.
“You have some who see it as a positive because companies are becoming more disciplined,” said Kristina Hooper, chief global market strategist at Invesco.
Mixed messages on the economy raise questions about recession risk
Big Tech was also more successful during the pandemic than many industries, giving them more room to fall.
“It didn’t lose as much labor in the pandemic, so it didn’t have the same shortage coming out,” said Harvard economics professor Jason Furman. “So in some ways it’s not a surprise that as the economy looks like it’s heading into a tougher patch that they need to recalibrate.”
And despite widely expected poor numbers next week, many of the companies have already driven down expectations so much that earnings may not be as bad as feared, the analysts said.
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Smaller tech firms have been sounding the alarm for months, with new venture capital investments slowing and many startups announcing layoffs throughout the spring and early summer.
Other economic indicators paint a mixed picture of exactly where the economy is headed. Americans are pessimistic about high prices, but they are still spending their money. The pace of new hires is not as high as it was a few months ago, but it is still far from falling off completely. Some economists and financial analysts still predict a recession later this year or in 2023, but that doesn’t mean it will be as painful as the one that followed the 2008 financial crisis.
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Some of the cuts in the tech industry have been long overdue, with new investment money too freely available for so long that some companies were bloated with resources they didn’t necessarily need, said Doug Clinton, managing partner at tech investment firm Loup Ventures.
“As the world changes and capital gets tighter, everybody’s looking and saying, ‘Maybe we don’t need as big a staff as we thought,'” Clinton said. the path into the tougher times.”
Kelsea Cozad, a marketing executive in Columbus, Ohio, was laid off this month as health tech startup Olive cut hundreds of jobs, admitting that its “rapid growth and lack of focus” had strained the business.
Cozad immediately put out the feelers to find a new job, and said she has received a good response. “There are a lot of people swimming in the water looking to hire,” she added.
Across the entire economy, job advertisements are largely is holding steady, according to data from Indeed, a job posting website. But software development job postings have fallen more than 12 percent in just the past four weeks, according to analysis by Indeed economist AnnElizabeth Konkel. The overall job market is strong, but specifically the demand for technology workers is slowing down a bit, she said.
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Overall hiring fell to the slowest rate since December 2021, LinkedIn economist Guy Berger wrote, “suggesting that tighter economic conditions and softer demand may finally be hitting the US labor market.” Technology was particularly hard hit, he noted.
Big Tech has been “spending like drunken sailors on hiring in recent years,” Wedbush analyst Dan Ives said. “I see it more as a correction, a tightening around the edges.”