Amazon layoffs point to greater difficulties in the technology sector

The massive job cuts at Amazon, one of the largest employers in the United States, show that the wave of layoffs sweeping the technology sector could be extended, as companies race to reduce costs, analysts said on Thursday (5). ).

Amazon CEO Andy Jassy said in a statement that layoffs at Amazon will rise to more than 18,000 as part of a workforce reduction.

Tech companies will lay off more than 150,000 employees in 2022, according to tracking website Layoffs.fyi, as the demand boom seen during the pandemic turns into a bust.

“Further layoffs are certainly possible… given the scale of investment we’ve seen in 2020-21, we would probably think that some degree of caution might be appropriate,” said Russ Mould, chief investment officer at AJ Bell.

Coming out of the pandemic, job cuts in 2022 are up 649% from 2021, led by tech companies, according to coaching firm Challenger, Gray & Christmas.

The drop in demand amid a sharp rise in borrowing costs has led several industry executives to admit they have overhired during the Covid-19 crisis.

Meta laid off 11,000 people last year and Chief Executive Mark Zuckerberg said he had wrongly predicted the pandemic boom would continue.

Tech giants Microsoft and Alphabet, which owns Google, have already hinted at cost cuts, including layoffs.

Salesforce chief Marc Benioff said on Wednesday that the enterprise software company had hired “too many people” as it announced plans to cut 10% of its jobs.

For Amazon, growth in its cloud unit, which brings in most of its profit, has slowed as companies cut spending, while its e-commerce unit is suffering from tight consumer budgets due to rising prices.

The crisis brought back memories of the dot-com bubble at the beginning of the century and the financial crisis of 2008, when tens of thousands of people lost jobs.

“Some of us will remember 2000 to 2003 as a huge bubble fueled by cheap money, high investor expectations and abundant cash,” Mould said. “It will be very interesting to see if there will be a repeat.”