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Commentary: Why So Many Tech Layoffs — And Why Now?

No recession has yet hit the U.S. or its tech sector. Inflation hurts, but the U.S. economy added hundreds of thousands of jobs last month. Still, certain shareholders have been vocal about their desire to see head counts trimmed — and trimmed further still.

The following is a brief excerpt from a column in the Los Angeles Times by Brian Merchant, the newspaper’s technology columnist. The column in its entirety can be found here.

Why have many of the most profitable companies of our generation — most of which are still very much profitable — announced staggering rounds of layoffs, one after the other? And why now?

A common refrain from analysts and reporters is that the companies are “tightening their belts” after profligate pandemic hiring sprees, in order to streamline operations. The executives overseeing the cuts, for their part, cite adverse economic circumstances. “We hired for a different economic reality than the one we face today,” Google CEO Sundar Pichai said in his layoff announcement. Microsoft’s Satya Nadella noted that “some parts of the world are in a recession and other parts are anticipating one.”

No recession has yet hit the U.S. or its tech sector. Inflation hurts, but the U.S. economy added hundreds of thousands of jobs last month. Still, certain shareholders have been vocal about their desire to see head counts trimmed — and trimmed further still.

To that end, critics argue that simple greed is driving the layoffs; they point to the tens of billions’ worth of stock buybacks the tech companies authorized last year. The Verge’s Elizabeth Lopatto spoke with industry analysts who said that tech companies are evaluating their bottom lines differently, and concluded that they’re doing layoffs mostly because everyone else is, even though layoffs actually often cost a given company money. And the fact all these layoffs are happening in such rapid succession gives the companies some cover — making them seem elemental, inevitable.