The outcome of all this could be that, as in economic downturns past, the biggest companies come out stronger than before. And that’s because in tech, more than in any other industry aside from perhaps entertainment, it’s human capital—the knowledge and skills of the workers who build the castles of code and hardware on which this industry runs—that matters most.
A softening labor market
The past few weeks have been tough for employees at some tech companies, small and large.
Klarna Bank, which specializes in buy-now-pay-later services, on Monday notified its workforce of 7,000 that 10% would be laid off. That came days after the Journal reported the Softbank-funded startup was seeking additional funding at a valuation a third lower than it was a year ago. Fellow fintech company Robinhood Markets last month said it would cut a similar share of its full-time staffers.
Microsoft will nearly double its global budget for merit-based salary raises, CEO Satya Nadella said.
PHOTO: LINDSEY WASSON/REUTERS
Even tech giants that have pledged to continue hiring have said they will do so at a reduced pace. On Thursday Microsoft announced it would slow hiring in its software group. Uber Technologies ’ CEO, Dara Khosrowshahi, and rival Lyft’s president, John Zimmer, both have said that hiring at their companies will slow. Meta declared a hiring freeze for some teams, and smaller social-media rivals. But the downturn doesn’t mean demand is evaporating, at least so far, say recruiters and in-the-trenches tech CEOs still battling for talent. Demand for workers with the right skills has for the past year been so high that laid-off workers are likely to land on their feet, and disaffected ones are likely to vote with theirs. In other words, both groups will quickly find employment at another company.As of May 13, postings on Indeed for software developers were 125% higher when compared with a prepandemic baseline figure from February of 2020. Postings for all jobs, not just tech ones, in the San Francisco Bay Area have also been holding steady at around 36% above the same baseline.
The perception created by the recent announcements about tech jobs will help big tech companies hire better employees, says Matt Hulett, a startup-turnaround specialist who has headed more than a half-dozen companies, and has been an executive in the tech industry since before the first dot-com crash in 2000. It could also help them fill some of the backlog of open positions they have maintained of late. Until tech-company share prices and revenue projections began tanking early this year, Mr. Hulett says had never seen a labor market like that of 2021, even during the most frenzied days of Web 1.0.Several factors could drive workers into the arms of big tech companies in the coming months or, should the U.S. enter a recession, years.
In the short term, companies’ announcing they are tapping the brakes on hiring has a psychological effect on employees and job seekers, says Ms. Swerland. This kind of news can make those who are already employed by a “safe” company more likely to stay, and free agents more likely to accept any given offer, she adds.
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