There is a recession fear sweeping Silicon Valley's tech industry, and top firms are not hiding it. Ride-hailing firm Lyft and payments company Stripe have announced major layoffs. Amazon has also adopted a cautious approach by stalling hiring for months.
Lyft co-founders John Zimmer and Logan Green announced the cuts to staff on Thursday.
The co-founders said the company would cut 13% of staff or nearly 700 jobs. Lyft has more than 5,000 employees not including drivers. The company in July laid off about 60 people and earlier indicated it planned to slow hiring and reduce budgets in some departments.
"We’re facing a probable recession sometime in the next year and rideshare insurance costs are going up. We worked hard to bring down costs this summer: we slowed, then froze hiring; cut spending; and paused less-critical initiatives. Still, Lyft has to become leaner, which requires us to part with incredible team members," they wrote in a blog post.
According to Logan and John, the layoffs impact every department in the company and were based on deprioritized initiatives, a move to minimise the number of management levels, larger savings objectives, and, in some cases, performance trajectory.
Federal Reserve has moved again to raise interest rates to combat inflation, signalling a greater risk that the U.S. economy is sliding into a recession. Faced with that possibility, tech company executives are warning of tougher times ahead.
Beth Galetti, senior vice president of people experience and technology at Amazon, sounded cautious in a note shared with employees this week. The memo notified them of Amazon’s plan to pause hiring across its corporate workforce, which includes employees in high-profile teams such as Prime Video and grocery.
"With the economy in an uncertain place and in light of how many people we have hired in the last few years, Andy and S-team decided this week to pause on new incremental hires in our corporate workforce," Beth wrote.
This is "not the first time", Beth added, "that we’ve faced uncertain and challenging economies in our past. "There have also been several years where we’ve tightened our belt and were more streamlined in how many people we added," Beth added.
According to Beth, the company still intend to hire a meaningful number of people in 2023.
After registering unprecedented growth and record profits, many of the world’s largest technology companies keep their fingers crossed.
U.S. applications for unemployment benefits plummeted. The Labor Department’s October employment report will be released on Friday, offering the latest snapshot on the overall job market.
Amazon’s hiring pause added to a string of similar news announced by other tech companies.
Stripe CEO Patrick Collison in a note to employees announced the "hardest change" about reducing the size of the team by around 14%.
The company will pay 14 weeks of severance for all departing employees, and more for those with longer tenure. That is, those departing will be paid until at least February 21st 2023. The company will also pay the 2022 annual bonus prorated for all departing employees, regardless of their departure date.
In recent months, tech giants such as Meta and Amazon have slowed down their hiring.
Microsoft recently told investors that new hires in this quarter “should be minimal.” Google parent Alphabet said it is planning to reduce hiring by half in the fourth quarter as the previous quarter missed the company’s earnings expectations.
A hiring freeze and layoffs are intensifying in tech. The CEO of Twitter, Elon Musk, has ordered cuts across the company, which employs about 7,500 people. Musk will notify employees On Friday through email whether they have been laid off, temporarily closing the facility and limiting staff access.
Given the ongoing economic turmoil, there are indications that the Great Resignation may be slowing down. According to a KPMG survey, 33% of CEOs in India, compared to 39% of CEOs internationally, have already implemented a hiring freeze.