Sale time in Frisco. A cyclone bomb pours torrents of rain over the Golden Gate and the entire west coast of the United States. Residents are urged to protect themselves and experts are anticipating floods and landslides. All things considered, this is the impression that emerges from the technology sector that made California’s fortune. While in Las Vegas, attendees of the electronics show are trying to take comfort in front of new gadgets, elsewhere, the sector is grimacing.
Amazon thus announced, on Wednesday January 4, its intention to cut 18,000 jobs. For its part, the IT giant Salesforce, whose 70-storey tower dominates the San Francisco Bay, announced the same day its intention to part with 10% of its workforce, or 8,000 people, and to close several from its offices around the world.
And these are just the latest announcements. Over the year 2022, more than 80,000 job cuts were announced in this sector in the wake of the stock market collapse of almost all companies in the sector in 2022. The Nasdaq Stock Exchange, on which most of the between them, has lost almost a third of its value in one year.
Simple explanation
For the first time, stars of the sector like Facebook, must announce declines in turnover. The Consumer Technology Association, which organizes the Las Vegas show, estimates that revenues from the technology sector in the United States (cars, televisions, mobile applications, etc.) will fall to 485 billion dollars in 2023 (457 billion euros), compared to 512 billion in 2021, a record year.
This situation contrasts strangely with the rest of the American economy which, despite the rise in interest rates and inflation, is operating at full capacity and struggling to find employees. While in November 2022 alone, tech stars announced more than 50,000 job cuts, companies in the country, all activities combined, hired 260,000 more people.
The explanation is simple. When the pandemic and its lockdowns brought the traditional economy to its knees, the entire tech sector benefited from the boom in video conferencing, movies and home shopping. Turnover and stock market valuations exploded. Result, hiring with a vengeance to keep up with demand.
Salesforce employed 50,000 people in 2020. It has grown to 80,000 in two years. Amazon, for its part, has recruited hundreds of thousands of additional people. “We over-hired”, acknowledges Mark Benioff, CEO of Salesforce. Since 2022, they have gone the opposite way to the rest of the economy. A bubble bursts.
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