The news: After two years of booming business for tech and media, the industries are now facing a wave of cost-cutting measures like layoffs and shutdowns that signal a focus on profitability, but could harm companies’ reputation with prospective employees in an already-tight labor market.
- Meta implemented a rare hiring freeze, and recently shut down its podcasting business after just one year. Netflix laid off several newly hired staff members for its blogging initiative Tudum.
- Recent statements from Uber CEO Dara Khosrowshahi saying the company will treat hiring as a “privilege” also imply a hiring freeze or slowdown.
- Social media and video app Cameo also laid off 87 employees last week—nearly a quarter of its workforce.
- Retail companies—including GoPuff, Peloton, Thrasio, and Reef—are also rethinking their staffing levels as the changing economic conditions force them to shift focus to turning a profit.
How we got here: Increased screen time and ecommerce spending during the early days of the pandemic brought a boom to many tech companies that drove them to rapidly add staff to keep up with demand.
- Amazon, for example, nearly doubled the size of its workforce over the past two years. As a number of fulfillment center employees went on COVID-19-related leaves, the company hired new employees. But as absences subsided later on, Amazon quickly became overstaffed, which resulted in lower productivity that cost it about $2 billion, per a recent earnings call.
- These cost-cutting moves come in the midst of a still-tight labor market in which many companies continue to struggle to hire enough workers. That’s lead to increased wages, which, in turn, has contributed to rising inflation.
- To curb that inflation, the US Federal Reserve aims to gently pump the brakes on the economy by steadily increasing interest rates throughout this year (including a 50-basis-point increase last week). That increases borrowing costs, which leads companies to hold off on investments.