Amid our current regime of high inflation and volatile prices, the technology sector has emerged as the primary driver of massive returns of capital and innovation. Not only within the technology sector but also across various industries, ranging from consumer discretionary to financial services, there has been a noticeable surge in consumer demand for products and services, leading to increased consumer spending. While conglomerates like Meta and Nike have been enjoying the benefits of heightened consumer spending, the market has also seen a prevalent theme of massive layoffs.
As technology companies realign themselves for AI and consumer discretionary for lower costs and increased efficiency, recurring cycles of employee layoffs have become common for conglomerates aiming to trim expenses and uphold a “year of efficiency,” as articulated by Meta’s CEO, Mark Zuckerberg.
The fiscal year of 2023 was a massive year of earnings growth and advancements within the technology industry, with the IT sector operating on sort of a “dual mandate” of increased AI investments and cloud computing initiatives, with evident ventures into the automotive industry. As these firms have increased their investment, this is also associated with higher costs associated with research and development, causing some of these bulge bracket firms to downsize in efforts to cut costs. With the S&P trading at benchmark highs and Meta surpassing a $3T market cap, this past month of January has accounted for about 23,670 workers being laid off among 85 IT firms. The IT hardware conglomerate Microsoft announced a 1,900-employee layoff cycle within the gaming division. Companies such as Google and Amazon have gone through various cycles of employee cuts in an effort to cut costs. Nike reported this past Friday (February 16th) that the company will be reducing its workforce by about 2% (1,600 employees), along with eBay cutting about 1,000 full-time workers, 9% of its workforce.
The primary distinction between being laid off and being fired lies in the terminology used to describe each situation. Getting laid off refers to losing one’s job due to reasons beyond one’s control, such as company downsizing or economic downturns, while being fired implies termination resulting from performance issues or misconduct on the part of the employee. As we have seen throughout the massive layoffs within these top companies, the common theme has been cost-cutting and improvements in efficiency by maintaining a small yet productive workforce.
Various companies are increasing their investments within other business segments, with Nike putting more of an emphasis on its running product and women’s apparel, causing these companies to reallocate various types of capital toward conducting business in a way that not only secures returns but in a way that mitigates unnecessary costs that are associated with daily affairs. The day following the Super Bowl, a day of record earnings for various streaming services, Paramount announced plans to cut around 800 employees, constituting roughly 3% of its workforce, despite the record-high viewership of Super Bowl LVIII. Additionally, United Postal Service (UPS) has revealed plans for a significant reduction in its workforce, with approximately 12,000 layoffs expected across various business segments.
Regarding its implications for graduating students entering the job market, this underscores the significance of a highly skilled workforce capable of not only completing tasks but doing so efficiently and accurately. In a fiercely competitive job market, this situation engenders different forms of uncertainty as employers seek not only top talent but also the most suitable talent for their needs. Bearing this in mind, the future composition of the workforce greatly hinges on the talent pool of graduating students and the diverse objectives set by businesses, whether centered on expansion or cost reduction, something for upcoming Stevens graduates to keep in mind.
