According to the latest report, after a period of rapid expansion, large technology companies are pressing the pause button in terms of recruitment. A sudden wave of cautious hiring has swept through the top ranks of tech companies, according to an internal announcement in recent days. Last year, the brakes on hiring had been loosened as big tech companies accelerated out of the shadow of the pandemic. And now, in the face of more difficult circumstances and an uncertain economic outlook, sentiment has shifted rapidly.
Google warned just last week that it would be more careful about targeting its hiring in the coming months, and this week it suspended all new jobs while reassessing its own priorities.
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Microsoft also confirmed that the company is using a business-by-business review to decide how to focus its investments more. The software giant hasn’t stopped all hiring and said it will still increase its headcount. But rethinking it’s business and operations so early in the company’s fiscal year, which only started this month, also shows how quickly the outlook can change.
There are also reports that Apple, whose fiscal year ends in September, is also planning to slow hiring in some areas as it develops plans for the next year. A key question now is whether these companies are taking pre-emptive action, or whether there is already evidence that consumer demand for their software and services is declining. The details are likely to become clearer next week when most of the big tech companies report their latest quarterly earnings.
Wall Street is in a state of tension right now. Elon Musk faced a slew of questions about demand for Tesla’s electric vehicles when he released his latest figures on Wednesday. Tesla is one of the companies that has experienced a previous hiring spree.
In 2019, Tesla slashed its workforce in an effort to become profitable, and over the next two years, the company experienced an explosive growth of more than 40% in its workforce. That makes the company’s recent 10% slashing of salaried staff appear to be aimed at restructuring after rapid expansion, rather than in response to a weakening economy.
Most tech companies have not disclosed their latest employee numbers. But one giant, Alphabet, was hiring until the middle of the year. Over the past 12 months, the company has grown its workforce by 21%, the fastest pace since 2018. The increase of 30,000 people during this period is more than Google’s entire workforce in 2010.
This looming economic slowdown could be unlike anything tech companies like Alphabet and Meta have faced before. The short-term violent shocks in recent years have brought loose monetary conditions, which have boosted user demand. At the time of the last financial crisis, Google cut 2% of its workforce in 2009 but increased its workforce by another 23% the following year as it emerged from a brief recession.
By contrast, this year’s tightening cycle by central banks, and the more protracted recession it could bring, is fraught with more uncertainty.
Digital advertising has proven surprisingly resilient during the brief economic crisis of recent years. But with digital advertising now accounting for about 60% of the overall ad market, internet giants can’t expect to be on their own if there’s a massive pullback in consumer spending.
However, with their fortified balance sheets, Big Tech is now more capable than ever and may be better positioned to weather recessions. When the financial crisis hit in 2008, companies like Apple, Microsoft, Google, Amazon, and Facebook had a combined $51 billion in cash reserves.
The five companies had $542 billion in cash at the end of March, according to rating agency Moody’s Investor Service. The cash of big tech companies now accounts for 27% of the total liquid reserves of U.S. companies.
These businesses have the financial muscle to continue investing and hiring in a recession. After a venture-capital boom, last year’s investment volume doubled from what was already an all-time high, and even many tech start-ups have unusually well-stocked reserves.
Venture capital firm Sequoia warned in a briefing to the entrepreneurs it funded last month that many businesses will need to cut costs in the future, as portfolio companies such as Airbnb, Zappos, and Tellme have done in previous recessions. But the agency also said that with bigger tech companies imposing hiring freezes, “hire for startups is about to get easier.”The tech world’s unusually intense hiring spree is over. But the war for top talent will continue.
