Some tech companies that saw an uptick in their business followed by a wave of hiring have since been struggling to maintain higher staffing levels, resulting in layoffs and hiring pauses.
Laura Ratz, an economist and assistant director at Moody’s Analytics, said that throughout the pandemic the tech industry found opportunities for immense growth, expanded their businesses and increased their hiring efforts.
She added that the “euphoria” over the past year or so was bound to slow down.
“Tech hiring did progress at a pretty rapid pace up until a few months ago … nothing like that is going to last forever,” Ratz said.
Towards the end of May, Los Gatos-based Netflix Inc. announced that it would be letting go of 150 employees as a result of the loss of 200,000 subscribers in the first quarter and a slowdown in revenue. And last week, the company terminated another 300 workers, 216 of who were based in the U.S. and Canada.
The company increased its staff numbers during the pandemic, when individuals were consuming their services at much higher levels as a result of the stay-at-home orders. In 2021, Netflix employed more than 11,000 people full time, compared to 9,400 in 2020.
Netflix is among thousands of companies – big and small – in the technology industry that had to make changes to their staffing during the same month.
Other companies slowed or paused hiring, and some even implemented widespread layoffs.
Companies like El Segundo-based PeerStreet Inc., Playa Vista-based Subspace Inc. and Long Beach-based Zwift Inc. are among those to make significant cuts to their teams.
Layoffs.fyi, an online crowdsourced layoffs tracker that is used by many as a source of information, reported that more than 360 Angeleno tech employees were laid off in the month of May; an additional 214 were furloughed as of June 20.
Subspace completely shut down its business operations in May and attributed the closure to a changing market.
“Our technology is incredibly unique and advanced, but market conditions have changed in the last several months and made it difficult to execute at the scale we needed,” the company announced in a Linkedin post.
Ratz said many of the companies carrying out layoffs are not legacy tech companies.
“From what I’ve seen, a lot of the layoffs have been in startups so far, whereas bigger companies, they’re maybe pausing or slowing,” Ratz said.
“A lot of this is just a reflection of a broader uncertainty. Mostly, I think it’s just a response to interest rates.” she added. “As interest rates have risen, it’s become a little bit more expensive for startups to raise capital, and that’s led to some tough business decisions.”
Despite the number of layoffs, national statistics don’t seem to be signaling alarm.
The U.S. Department of Labor reported on June 3 that within the last month employers added 390,000 jobs across several industries including hospitality, business services and transportation.
In May, the number of tech jobs in Los Angeles increased by 14,927, with a total of 33,975 tech job postings, according to a report by the Computing Technology Industry Association.
Alec Levenson, senior research scientist at the USC Center for Effective Organizations, said “the economy is overheating.”
“There’s so much speculative investment in technology and tech companies, it is pretty much a complete certainty that at some point there’s going to be another bloodletting that happens in the tech sector,” Levenson said.
What is happening in the sector today, he added, is very similar to what happened during the 2001 recession where the technology sector is “falling and it’s falling really fast.”
“We are heading into a recession because the economy got overheated, because of Covid, because of supply chain issues, because of lots of stimulus from the federal government,” Levenson said.
“You could argue that the tech sector is suffering collateral damage because of the things that are happening. When the regular economy sneezes, the tech sector can catch a really bad cold,” Levenson added.
