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Tech layoffs surge: Unprecedented job cuts across sectors raise economic concerns

Unprecedented job cuts across sectors raise economic concerns

In January, according to data from (Bloomberg, WSJ, NYT), approximately 25,000 individuals in the new technology sector faced job losses. This figure represents a record since February 2023, partly influenced by the seasonality associated with the start of a new year.

Companies are intensifying their efforts to reduce costs, aiming to enhance net results amidst rising expenses and limited revenue growth. This trend is further compounded by decreasing inflationary expectations. Notable companies such as Google, Microsoft, eBay, and Salesforce are among those implementing layoffs.

Since the beginning of 2022, nearly half a million professionals in the technology industry have found themselves unemployed. This unsettling trend is not necessarily linked to revolutionary advancements in artificial intelligence or substantial increases in productivity.

The record for layoffs is currently held by the German company SAP, which let go of 8,000 employees. Joining this league soon is PayPal, set to cut 2,500 jobs, a move that triggered positive market reactions. The primary objective for companies is to trim unnecessary expenses and refocus on core business activities. In response, companies are reevaluating their hiring policies.

Despite these challenges, not all companies have been able to maintain their momentum through proportional business growth. Companies experiencing a disconnect between these two aspects are often the ones resorting to significant layoffs.

However, this is not an absolute rule, as exemplified by thriving companies like Microsoft, Google, and Salesforce, which continue to lay off employees despite their overall success. Managing employees has become a considerable challenge, particularly considering the impact of tax policies.

It's important to note that the phenomenon of layoffs is not confined to the technology and finance sectors. The largest parcel delivery provider in the U.S., United Parcel Service, is cutting 12,000 jobs, possibly due to the sudden rise in costs resulting from negotiations with the courier union, where compensation is higher in the U.S. compared to that of programmers.

Nevertheless, commentators predominantly focus on layoffs within the tech industry. The reason lies in the perception that artificial intelligence is acting as a catalyst for increased unemployment, particularly among white-collar workers who have experienced decades of significant salary increases.

There is also speculation that non-IT companies dealing with consumer services might follow suit, evident in the case of Starbucks, where a weaker-than-expected financial report suggests a potential drive towards cost-cutting.

Other examples include the potential layoff of nearly 30% of iRobot's (Roomba) employees, as Amazon has halted its acquisition offer.

Concerns are also rising among Boeing employees after the company suspended financial forecasts for 2024, citing increasing debt and FAA restrictions related to 737-Max production.

Additionally, American Airlines recently laid off around 655 employees.

In the defense sector, Northrop Grumman reported expected billion-dollar losses on the production of B-2 Raider bombers, whose contracts were negotiated with the Pentagon almost a decade ago.

Despite facing substantial losses, the company is obligated to deliver the bombers, with each model incurring approximately $500 million in losses.

While some may speculate that desperation might lead Americans to lay off workers in the strategic defense sector amid escalating geopolitical tensions, it seems improbable.

It's crucial to consider that the number of active job offers remains high. Thus, the current scenario may not necessarily indicate widespread unemployment but rather a trend toward job reallocation.

Even Nasdaq (cutting 100 jobs), despite being at historic highs, and fintech company Block (laying off 1,000 employees) are participating in this trend. Despite these shifts, the prevailing belief is that a recession is unlikely. However, questions persist about whether a wave of layoffs will impact the electric vehicle (EV) industry, where demand has significantly dropped, and Western companies face 'low-cost' competition from China.



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