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Recession is Main Reason of Mass Layoff

In Technology
March 31, 2023
layoff in it sector

Large IT organizations frequently go through phases of restructuring, which can occasionally lead to layoffs or job losses. Numerous factors, including changes in business strategy, adjustments in consumer demand, or the desire to cut expenses, could be to blame for this.

It can be painful for individuals impacted when layoffs take place, especially for IT employees who may have put a lot of time and effort into their roles. Layoffs are frequently a last resort and businesses typically try to support those affected by them by offering severance packages, career counseling, and help with job searches.

What Is A Recession?

Recessions are typically referred to as “technical recessions” in the media when real GDP growth has been negative for two consecutive quarters. This definition is frequently used by journalists and can be found in textbooks. At the time of recession, Companies don’t make profit and it becomes the reason for mass layoff which leads to unemployment.

What Has Happened In The Tech Industry Prior To The Pandemic?

Prior to the pandemic, the tech sector was expanding steadily. Companies’ need for staff increased as investments in cybersecurity, cloud computing, and artificial intelligence flowed in. The tech sector hired more than 1.3 million new personnel in the five years prior to the pandemic.

  • A Lot Of The Current Workforce Is A Layoff

In the first 15 days of this month, more than 24,000 tech workers were let go by 91 organizations, a sign of worse times to come. Over 1,000 businesses let go of more than 1.5 lakh workers in 2022. 

A number of significant tech businesses, such as Meta, Amazon, Twitter, Better.com, and Alibaba, made layoffs. Indian businesses were not unfamiliar with this occurrence.

  • The Domino Effect Is Also Seen In Indian Startups Too

Due to the unstable market, the social media business ShareChat let go of 20% of its workforce, affecting more than 500 workers. Dunzo has laid off 3% of its workers. The leader in global e-commerce, Amazon, announced its plans to fire 18,000 employees worldwide, including almost 1,000 in India.

Big techies fire a lot of layoffs

  • Together, Meta Platforms Inc, Amazon, Twitter Inc, and Snap Inc cut roughly 97,000 roles in 2022, blaming the economy’s slowdown and shareholder pressure. Comparing this amount to 2021, a 649 percent increase has occurred.
  • The video hosting service Vimeo announced layoffs for 11% of its workers due to “difficult times.” Huobi, a cryptocurrency exchange, also intended to let go of 20% of its workforce.
  • The software business Salesforce announced that 10% of its workers, or over half of the personnel hired during the pandemic, will be laid off.
  • The majority of duty eliminations will occur in the PXT and Amazon Stores organizations, according to a statement sent to all employees by Amazon CEO Andy Jassy. He added that he was “grateful” for people affected by these job reductions.

Some Other Factors That Contribute To Mass Firing

  • Mass Hiring During A Pandemic

It’s not all that shocking to learn that a company fired a worker after two years. In reality, these very organizations went on massive recruiting binges during the Covid-19 outbreak. In the pandemic era, they were offering competitive positions and alluring incomes to entice new personnel and give them an advantage over their rivals. However, as soon as everything returned to normal, it became clear that these extra workers were dead weight, and they were either fired or placed on furlough in order to guarantee the businesses a consistent flow of cash.

  • Automation Of Manual Business Processes

Microsoft jumped to declare its commitment to invest $10 billion in Open AI as soon as it announced the mass layoff of its 10,000 employees. Also widely rumored is that Google, which just laid off 12,000 employees, is working on and investing in an AI search chatbot to compete with Chat GPT. It’s interesting to note that 28% of all of these layoffs took place in the HR industry. Therefore, by firing a large number of workers, these computer companies may use their payroll resources to develop new products or enhance their existing operations.

  • Impact Of Economic Turmoil On Economy

 The failure of Silicon Valley Bank and Signature Bank makes it more difficult for the Fed to “manage” the macroeconomy by adjusting the interest rates up or down in order to reduce inflation (and inflation expectations) and increase economic activity when the economy inevitably enters a recession.

The Fed is also in charge of safeguarding financial stability in the event that banks fail and averting other bank runs across the nation. The inverted yield curve, notably the divergence between the 10-year Treasury note and the three-month T-bill, is one of the best predictors of an upcoming recession.

Final Words

Mass layoffs happen when cost-cutting, improvement technology or fear of businesses going down due to recession or any other fear. A lot of employees lose their jobs but it is a great time to upskill themselves and acquire new skills which make them job ready for the future.