Giant tech corporations and well-known startups are cutting their staff in a bid to prepare for a “storm” to come – a feared recession.
The war in Ukraine, heavy sanctions, halt of financial stimulus programs, and regional economic developments create an unstable environment for businesses to thrive. When trying to mitigate the uncertainties, many tech companies found their best way forward by letting some workers go.
Y Combinator, a startup accelerator, warned startup founders that they should plan for the worst as things “don’t look good.”
But it’s not just startups that should be on alert. Musk has announced in two separate messages to executives and workers that Tesla needs to reduce its staff by 10% and will be pausing all hiring worldwide. Allegedly, the decision concerns Musk’s worries about a possible upcoming recession.
"Note, this does not apply to anyone actually building cars, battery packs, or installing solar," Musk wrote in the email seen by Reuters.
Additionally, while salaried headcount will decrease, hourly headcount will increase, reflecting Musk’s view that the company has become overstaffed.
The news came after an email was sent to employees, requiring them to work a minimum of 40 hours a week in the office or leave Tesla. The announcement has received backlash from German workers, with the layoff announcement likely to cause more discontent in the Netherlands. Some experts are speculating that the new requirement is a subtle way of forcing employees to resign voluntarily.
Musk has recently emphasized during a conference in Miami Beach that we are already in a recession, which will only get worse. And he’s not alone in this view.
"You know, I said there’s storm clouds but I’m going to change it … it’s a hurricane,"JPMorgan Chase CEO and a Wall Street leader Jamie Dimon said during a financial conference in New York, adding that we better brace ourselves.
The war in Ukraine, as well as the Federal Reserve Bank’s quantitative tightening program aimed at reducing the amount of liquidity in the system, might have severe consequences for the global economy.
More companies are preparing for a recession
In addition to firing already employed workers, some organizations are rescinding their job offers. In a shared tweet, Coinbase – which operates a cryptocurrency exchange platform – is seen rescinding a number of accepted offers to ensure that they’re “only growing in the highest-priority areas,” also citing the impact of the macro environment.
Coinbase has previously announced a slow down in hiring in order to “succeed during and after the current market downturn.” Yet, according to the previous company’s emails shared on Twitter, all made offers were not supposed to be rescinded. Since then, Coinbase stated that it “will extend the hiring pause for both new and backfill roles for the foreseeable future and rescind a number of accepted offers.”
Other crypto organizations are in a similar position. Bitso, T2M, Gemini, Rain, and Buenbit have all announced staff reductions.
“We are writing to update you on a difficult decision that will impact a number of you and the overall size of our team…The crypto revolution is well underway and its impact will continue to be profound. But its trajectory has been anything but gradual or predictable…This has all been further compounded by the current macroeconomic and geopolitical turmoil. We are not alone,” said Gemini’s CEO and President in a public statement following a 10% staff layoff.
Robinhood Markets, which offers trades of stocks via a mobile app, will be reducing its headcount by 300 full-time employees.
“Today we made the difficult announcement that we are letting go approximately 9% of our full-time employees…we’re anticipating and being responsive to changes in the way our customers invest – especially during this time of global conflict, economic uncertainty, and high inflation,” a message from the company’s CEO and Co-Founder Vlad Tenev says.
Meta is also slowing down its hiring process for most mid- and senior-level roles. Meta’s CFO David Wehner cited the war in Ukraine as an escalator of an already uncertain situation for advertisers, as well as mentioned the overall declining advertising demand.
PayPal has also announced plans to reduce its staff by over 80 people in its headquarters in San Jose, California, in a bid to cut costs. ClickUp, a cloud-based collaboration and project management tool, laid off 7% of its employees. Klarna, a Swedish fintech company, will be reducing its global workforce by 10%.
Despite mass layoffs across the tech industry, there are still many positions available, with a variety of companies hiring. And despite the news, tech hiring was up by 2.1% in May, with Guy Berger, Principal Economist at LinkedIn, expecting things “to cool off at least a little going forward,” although there seems to be no sign of it yet.
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