Tech layoffs signal worries ahead for the economy
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Much ink has been spilled in recent weeks about the state of the economy and whether we're headed for a slowdown, a recession or something else.
While the broader job market seems to show -- at least for now -- that the economy is still performing strongly and the country's population has money to spend, the tech sector is starting to crack.
A number of tech companies have either firmly announced plans to reduce their headcount or slow down their hiring plans. For example, just this week, cryptocurrency company Coinbase (COIN) announced it was laying off 1,100 workers, or roughly 18% of its workforce.
Additionally, it was reported that Spotify (NYSE:SPOT) also intends to slow its hiring by 25%, becoming one of many tech companies to announce a change to past hiring plans.
On the high-end, companies such as Stitch Fix (SFIX), Peloton (PTON), Carvana (CVNA), Bird (BIRD) and Robinhood (HOOD) have taken an ax to their payrolls. Peloton and Bird have cut 20% and 23% of their staff, respectively.
While these cuts are drastic, others have been more modest in nature.
Real estate tech company Redfin (RDFN) said it would lay off 6% of its workforce, or roughly 470 employees. Compass (COMP), another real estate technology company, recently announced plans to cut 10% of its workforce, the equivalent of 450 jobs.
On the low-end, PayPal (PYPL) and Netflix (NASDAQ:NFLX) reportedly have cut less than 1% and 2% of their employees.
Those are just some of the publicly traded tech companies. Crunchbase has compiled a list of private, as well as public, tech companies that have shed employees since the start of the year. The list includes companies many areas of tech, including crypto, social media, enterprise software, and fintech.
The pace of tech-related layoffs seems to be accelerating. Publicly compiled reports suggest that the strength of the job market that so many lawmakers and officials have talked about may be on shaky ground.
Andrew Stettner, an unemployment expert at The Century Foundation, recently told Seeking Alpha that it's unclear where exactly the labor market is headed, but "many things are flashing warning signs."
Earlier this month, executive outplacement firm Challenger, Gray & Christmas reported that total job cuts fell 15% in May, but "exploded" in both technology and financial technology (as well as construction). This suggests that sectors of the economy that had been exceptionally strong are now starting to show weakness.
"We will see layoffs especially in crypto and some other areas in tech marketing and services, but demand for skilled tech talent is still strong," Tim Bajarin, of Creative Strategies, said in an interview with Seeking Alpha. He added that hardware, software and semiconductor engineers are "still in high demand and commanding big salaries."
Bajarin says that Apple (NASDAQ:AAPL), Google (GOOG) (NASDAQ:GOOGL) and Meta Platforms' (META) Facebook are still largely going ahead with building projects. They anticipate the need for more staff, and believe they should still invest during downturns as demand is likely to be strong once the economy turns around.
While that may turn out to be true, Meta Platforms (META) and Twitter (TWTR) have slowed hiring or indicated plans to lay off some workers.
The next few months are likely to indicate whether the economy simply slows down or slips into a recession. If the tech sector is any indication, however, it's likely that more pain is forthcoming.