Big Tech Layoffs
The Madness of Capitalism
SUMMARY: GDP growth was stronger than expected. Unemployment remains historically low. Supply chain issues continue to work themselves out. China is entering a period of strong projected growth. The Fed has even signaled that it will slow the pace of interest rate increases. And yet, the tech sector is laying people off like you read about? What’s behind the doom and gloom in Silicon Valley and some areas on Wall Street? We look into the recent spate of mass layoffs and try to square the tech industry narrative with real economic facts on the ground. But we begin with an update from Max on what’s in the works and behind our recent slowdown in episodes.
Click here to listen to the episode
A NOTE FROM MAX
Hey Unf*ckers. It’s your boy Max. Before we dig into today’s essay, I wanted to fill you in on what’s going on with the full Unf*ckings.
For anyone checking out our YouTube channel, today’s episode is already laid out in video format because it was a timely episode on the Big Tech layoffs. I wanted to release them simultaneously, but I had a few production hiccups and was set back a bit.
Now, with respect to the full unf*ckings, I’m obviously behind on our schedule and wanted to apologize for that. Two reasons for the delay. The first is the incredible learning curve with video production. I’m loving every minute of it, but it’s a challenge for this old ass brain. (I think I’m getting the hang of it.)
But the bigger issue has actually been with the upcoming two part episode that’s in the works. I can confidently say that the first one will indeed drop next week, and we’ll be recording part two at the same time, so we’ll be on track for the week after. The reason it’s taken me so long is that I’ve actually grown emotionally attached to the subject matter. The shows are on the presidency of Jimmy Carter. Being emotionally tied to this material isn’t something I expected. But the further into it I got, the more the story of Jimmy Carter really struck a nerve.
Unf*ckers undoubtedly know by now that I have a great fascination with the ‘70s. Throughout our journey, it became increasingly evident that the ‘70s was an inflection point, as it marked the true beginning of the neoliberal era. Many believe that we’re transitioning from the neoliberal era as we speak, and I tend to agree with this assessment. So much of the economic, social justice and environmental damage over the past half century has roots in the 1970s.
We had a choice. A choice to double down on justice, environmentalism and social safety nets. To exit the Cold War in a way that could have seen a different Russia than what we have today. A chance to build on Middle East Peace accords. To foster the democratic revolutions in Latin America. To nationalize healthcare. Create a comprehensive energy strategy that would have taken us off fossil fuels long ago. Not only was all of this possible, but it was in the cards. That’s what Americans voted for when they cast their ballots for Jimmy Carter.
Today, Carter has been reduced to a footnote, and a punchline, by many. Most young people really have little idea of what his years were all about. I’m fifty years old and only have vague recollections of his time in office myself. Older generations remember how fraught this period was, and the two things that stand out the most are the hostage crisis and gas lines. Powerful moments that were enshrined in the national consciousness.
But delving into Carter’s life, his presidency and the relentless pace of upheaval, here and around the globe, that challenged him has leveled me in a peculiar way.
So, I hope you trust me that this is a story worth waiting for. I know it’s an old one, and you can just watch the history channel to get your fill. But I think there’s a call to approach these seminal years with the right level of investigation and nuance.
Now, with that said, let’s get to it today and talk recession and what the fuck is going on in the tech sector.
Are We In a Recession or Not?
Spotify, IBM, HP, Cisco, Zillow, Meta, Salesforce, Microsoft, Amazon, Twitter, Alphabet, Snap, Shopify.
BlackRock, Goldman Sachs, Morgan Stanley, Citigroup, Coinbase, Stripe.
These firms are laying people off like you read about. And their investor relations departments are working overtime to sell recession fears to the business channels.
The dire warnings from economic elites about an economic downturn never materialized in 2022, despite the Federal Reserve’s best efforts to drag down the economy and trigger an unemployment crisis. But many of them are still at it, which can be dizzying as a media consumer. The truth is, there’s nothing necessarily normal about the economy right now.
Some in the mainstream media tepidly note that the post pandemic economy is actually pretty good. Yes, there’s still a yawning economic inequality gap. Jeff Bezos is still so rich that a Dutch port almost dismantled part of a historic bridge to fit his super yacht. And the Biden administration is doing its level best to tell the world that the economy is humming along. But leading figures from two sectors of the economy are doing that Chicken Little thing and warning of a looming economic catastrophe. So let’s dig in.
Massive Downturn Ahead. Yooge.
If we’re to listen to Wall Street and Big Tech, we’re in store for a massive downturn. On Main Street, it’s hard to ignore their calls. For most Americans, inflation has ranged from difficult to devastating. U.S. savings has declined from an all time high during the pandemic to the lowest point since 2005, leaving many in a precarious position not seen since the run up to the financial crisis; the reason so many were unprepared to weather that storm.
So, it’s little wonder there’s fear in the air. The main culprit has indeed been inflation. On the podcast, we’ve gone into great detail to explain how inflation spiked as a result of stubborn supply chain issues in China, the disruption in food and gas from Ukraine and sheer corporate greed. These issues are all being relieved one-by-one as inflation cools slightly, but it has had an outsized impact on the American consumer.
But, in terms of economic data in the here and now, the top line numbers support the Biden administration’s positive view to a large degree.
The Commerce Department’s latest report says U.S. GDP increased at an annual clip of 2.9 percent.
Consumer spending grew at a 2.1 percent rate.
The official unemployment rate still stands at a five-decade low of 3.5 percent.
In any normal environment, as if normal still exists, these figures would be cause to celebrate.
Despite all this, the tech overlords that control nearly all the content we see, our consumer habits and commodify our data in truly dystopian ways are having a firing frenzy. Over the last year, Big Tech has laid off 200,000 workers, including nearly 50,000 this year alone.
Firms headquartered in Silicon Valley are responsible for about half of those job cuts in January. Silicon Valley, with some of the highest rates of income inequality thanks to Venture Capitalists, has emerged as the layoff capital of the United States, with Alphabet, Amazon, Meta and Microsoft responsible for a quarter of the tech layoffs in the last year. As usual, there’s a little more to the story.
But get this: These mega-corporations are still raking in billions, but not nearly enough to make investors happy—that’s right, it’s all about the dividends, baby. And the tech sector is coming off a year in which it added 260,000 jobs, growth not seen in two decades. Needless to say, a slowdown in growth for many of these firms was inevitable as other parts of the economy came back online. And believe me, most of these companies are doing just fine despite the massive amount of layoffs.
Take Alphabet, parent company of Google. The business had revenue of $69.09 billion for the quarter. Alphabet had a net margin of 23.75%, which is up 6.1% compared to the same quarter last year. Microsoft has tripled its revenue over the past dozen years and is just printing cash. They averaged about $16 billion in net income each quarter in 2022. These are astounding figures.
Wall Street Jumps on the Bandwagon
Over on Wall Street, it’s the same story. Bank of America, JP Morgan and Morgan Stanley each had phenomenal quarters. Goldman Sachs and Wells Fargo, not so much. Most of the declines on Wall Street related to a slowdown in mergers and acquisitions. The groups with the strongest wealth management divisions absolutely crushed it. So what does this mean? If your core business is investment banking, things aren’t so great because the Fed increased interest rates, which makes debt financing pretty tricky. But if you manage the wealth of the 1%, you’re doing just fine because the 1% is still sitting on a preposterous amount of wealth.
So what the hell is really going on?
GDP is okay, the “official” unemployment number remains at historic lows and inflation—really price gouging, but don’t tell the corporate media that—is slowly declining, but still hurting the average American. Yet the wealthiest companies in the world, many of them monopolies, are shedding their workforce.
And before you shrug at the loss of thousands of seemingly high-paying positions, consider a few things: Many of those now without work represent the Millennial and GenZ generations—groups that haven’t quite experienced the crushing feeling of mass layoffs. Others are foreign workers holding visas that allow them to temporarily work for a U.S. corporation, and they have a limited time to find a new job after being laid off. And, as always, this is not just a story about one uber-wealthy sector, it’s central to our ongoing discussion of modern capitalism—defined by a never-ending pursuit of higher quarterly profits.
All thanks to an economy that’s been completely captured by shareholders.
Let’s talk about timing for a moment.
Not since the dot-com bubble have we seen tech layoffs occurring at such a high rate. For the most part, these companies have not only thrived, but amassed immense power. In 2021 alone, Meta, Amazon, Microsoft and Alphabet combined spent nearly $60 million in lobbying—one year after coming under scrutiny during Congressional antitrust hearings. Hmmm.
And you can’t tell the story of the Silicon Valley boon without talking about venture capitalists, which rained down money on the Bay Area. With interest rates at all-time lows, there was cheap money to be had—and Big Tech gobbled it up. This quote from a Times article sums it up perfectly: “The whole tech industry of the last 15 years was built by cheap money.”
Now, recall the early months of the pandemic. With everything transitioning to the internet—school, dinner orders, groceries, doctors visits, happy hours, literally anything you can think of—tech bet big on an all-digital future.
So, they went on a hiring spree.
Again, here’s a passage from the Gray Lady: “For a stretch of the pandemic, tech companies couldn’t hire fast enough. Talent wars broke out in Silicon Valley, with firms vying for software engineers, often lavishing extravagant perks on their new and would-be hires. As profits soared, executives acted as if the party would never end.”
Amazon, for example, announced $108.5 billion in sales for the quarter ending March 31, 2021. They weren’t the only ones flush in profits. With the sector booming, tech propped up the stock market while other industries treaded water. Everyone wanted to get into the action: More companies in Silicon Valley went public in 2020—amid the early days of the pandemic—than in 2019.
But the party had to come to an end.
Tell Us Who’s to Blame!
So, who’s to blame right now? Well, the neoliberal masters of the economy would have you believe it's, well, you.
Forget about corporate price gouging, the Fed ending the era of cheap money and raising interest rates or yet another supply shock due to the war in Ukraine.
One of the most odious figures in America, Larry Summers—and his fellow neoliberal economists—have been blanketing the airwaves with calls to reduce the workforce, arguing that wages (which haven’t kept pace with inflation) were the real problem—not the fact that the combined assets of billionaires grew 50 percent since the pandemic. And so, the axe started to fall.
While there had been layoffs throughout 2022, the first big shoe to drop was Twitter. Just a few weeks into his reign, an over-leveraged Elon Musk on November 4th cut the social media company’s workforce in half, raising concern about the platform’s viability. Despite much consternation, Twitter is still in operation—for now. Five days later, Meta, Facebook’s parent company, cut 10 percent of its company. Many others followed: Salesforce, Spotify, Microsoft, Amazon and Alphabet, along with other players like HP, Cisco, Zillow, IBM, DoorDash, Kraken and too many others to name.
You get the picture. Elon opened the door, and the others came pouring through under the cover of his madness.
Okay, but who are these workers getting laid off? While it’s a difficult puzzle to piece together, we do have some clues. The mass layoffs have seemed to target sales, marketing, recruiting and human resources positions. But that’s not all.
Remember the response from major corporations throughout the U.S. following the police murders of George Floyd and Breonna Taylor? They were all very sympathetic, right? Mark Zuckerberg went on Facebook and actually said the words, “We stand with the black community.”
How quick things change. According to Bloomberg, the current layoffs are “gutting diversity and inclusion departments,” and the outlet noted that openings for such positions fell by 19 percent last year.
These layoffs have also exposed the faux culture Big Tech firms sold to an obsequious corporate media about the need to drive creativity and make work feel less like work. Now, as layoffs mount, axed workers are being painfully transparent about how much it sucks to be fired sitting in your living room all alone, or learning their fate when failing to access company accounts—so much for the cult of company culture.
Meanwhile, cities like San Francisco are left to pick up the pieces. Remember earlier when we mentioned that Bay Area-headquartered firms were responsible for 25,000 tech layoffs in January? Well, San Francisco Mayor London Breed acknowledged that the city’s private sector needs to diversify. In a city already among the leaders in inequality, Breed said that remote work, among other factors, caused a massive budget deficit—and the recent wave of job cuts likely won’t help matters.
So, here we are. More than 200,000 tech jobs lost in the last year, despite many of these firms generating obscene amounts of wealth. They grew so fast that, essentially a year after the pandemic started, the collective revenue of Amazon, Apple, Alphabet, Microsoft and Meta ballooned to nearly $1.2 trillion.
It’s obvious what needs to happen: The labor revival spreading across the U.S. needs to penetrate through every sector of the economy—especially Big Tech firms. If multi-million dollar baseball players can have a union, one that’s regarded as among the most powerful in the country, so too can engineers, DEI professionals and HR workers—though we know it won’t be easy, considering the way in which companies like Starbucks and Amazon have tried to quash unionizing among the working class. But it’s necessary.
A recession may come. Eventually. Though most of the leading indicators that precipitate prior recessions would indicate otherwise. But we’re not in a normal functioning economy, in part due to continued supply shocks, the Fed’s intervention in the debt markets and what effect rising interest rates will have on emerging market debt. We do live in a global economy.
Jerome Powell and people like Larry Summers believe in the idea that “slack” in the economy is necessary to maintain price stability. Translation: They need more of you out of work. But there’s a problem. Three things made this almost impossible at this moment.
One, our immigration policy has prevented an influx of new workers, legal or otherwise, to alleviate hiring in certain sectors. Two, a record number of older workers finally decided to retire during the pandemic and they’re not coming back. And, three, we killed more than a million Americans with our response to COVID.
That’s why there are still a record number of job openings compared to those looking for work. The only thing Powell and company are doing is making it more difficult for Americans to manage their daily lives. Thus, the decline in savings. But, it’s also creating a potential crisis in foreign debt markets like Latin America. This is a dangerous game the Fed is playing.
The upshot of the whole tech layoff debacle, with Wall Street piling on, is that workers are disposable in the pursuit of quarterly earnings per share. You might not have sympathy for the poor engineer sitting in an empty San Francisco apartment after discovering via a Slack message that their job had been eliminated. But this person is a proxy for the bigger labor fight in America. For the rail workers that Biden turned his back on. For the Chris Smalls of the world who are hurling rocks at Goliath. For everyone out there hustling on nights and weekends. Remember that the wealth managers are doing just fine.