US tech jobs: dismissals do not reverse pandemic-era expansions

Microsoft’s decision to axe 5 per cent of its workforce is a show of prudence ahead of its earnings report next week. It is not alone. Amazon is engaged in its largest round of job cuts to date, reducing its workforce by more than 18,000 people. Alphabet, Coinbase and Salesforce have all announced sizeable workforce reductions in recent weeks. The website Layoffs.fyi, which keeps a tally of tech job cuts, puts the total above 37,500 so far in 2023.

The scale of the cuts illustrate the pressure tech companies are under to improve margins after a spell of overly optimistic hiring and slowing growth. But workforce inflation over the past two years means the reductions represent only a fraction of newly enlarged teams. Tech job losses are more readjustment than sector-wide predictions of prolonged economic downturn.

Take Amazon. Its cuts are among the largest recorded by the tech industry and reflect a fall in online sales growth as shoppers return to stores. But the reduction looks significantly less dramatic when compared to the size of the workforce. Since the end of 2019, Amazon’s worker count has nearly doubled. Stock-based remuneration in the 12 months to September 30 rose more than 50 per cent on the previous year. Job cuts equal about 6 per cent of corporate employees and just 1 per cent of the wider workforce. The company is chipping away at its pandemic-era spending spree, not throwing it into reverse.

Microsoft’s headcount reduction follows a quarter in which net income fell 14 per cent on the previous year. But even after the cuts, Microsoft’s workforce will be larger than it was at the end of the fiscal 2021 year. The same goes for Salesforce, which plans to cut about 10 per cent of employees following expansion via acquisitions including the $27.7bn deal to buy Slack Technologies.

It is possible that further cuts are to come. Then again, tech’s pursuit of growth at all costs is a difficult habit to break. In mid-2020, Salesforce confirmed plans to dismiss about 1,000 workers. One month later, chief executive Marc Benioff announced plans to add 12,000 more.