New Microsoft Layoffs Spark Tech Recession Debate

Photo of a building with the Microsoft logo on the facade in Cologne, Germany.
Microsoft layoffs will affect mostly physical locations, as it did with those in Germany.
Source: Efes via Pixabay.com

Microsoft recently announced that it’s laying off almost 1,000 employees in an effort to restructure. These Microsoft layoffs have sparked a debate about a possible tech recession. 

But, as with the other layoffs this year, they haven’t affected the tech-related fields as much. Companies have carried out job cuts in preparation for a recession. Additionally, companies are closing down physical locations and cutting down on sales jobs before the possible recession. However, this doesn’t mean a business would gamble on losing top talent in tech.

Additionally, since the US Congress dubbed October “Cybersecurity Awareness Month,” many experts have tried to conjure up its connection with the tech layoffs. It’s important to note that cybercrimes cost USD6.9 billion in losses in 2021. However, the correlation is a little far-fetched.

Restructuring in Microsoft; 1000 Employees Laid Off

Although the recent Microsoft layoffs have caused quite a stir online, these are one of the minor Microsoft layoffs in the last 18 months. Since mid-2021, Microsoft has reduced its global workforce by roughly 40,000 people.

While the layoffs have scrapped some software development projects, few coders, developers, and designers have lost their jobs. Microsoft’s layoffs have mainly occurred in the sales sector. Moreover, the company is closing down physical locations around the world.

Microsoft has sold 12 million+ Xbox series X/S consoles. Having many physical locations in one region has resulted in diminishing returns from sales. Additionally, today’s customers buy consoles, peripherals, and games online.

The Microsoft layoffs were a reasonable move. Markets decide overhead spending on locations, labor costs, and maintenance expenses.

Microsoft’s stock price also dipped after the layoff news. The company’s stock price had just improved last week. In the last 12 months, Microsoft has lost almost 30% in value, around USD100 per stock.

This keeps with the trend of share price drops in Big Tech companies.

Image of two women talking over a table.
Sales today are quickly moving to their boutique or online.
Source: Blake Wisz via Unsplash.com

Non-Tech Jobs Hit Most

A data study by the hiring platform Hirect.in suggests that of the 44,000 tech workers laid off in 2022, more than 14,000 were highly skilled. Many cite these numbers to show that the layoffs, like the ones at Microsoft, have impacted IT specialists, among others.

But, the truth is more complex. The hiring platform based the data on working IT specialists who lost their jobs during the year. However, the overwhelming majority of the 14,000 specialists worked in startups.

In most cases, startups fail to take off, leading employees to lose their jobs. Almost 90% of all startups fail in their first five years. That five-year timeline got even shorter with lockdowns and the 2022 tech crunch.

That fact alone shows that the demand for high-skill tech jobs will increase. Given the current situation, most companies wouldn’t risk losing rare talent.

Quiet Quitting vs Loud Firing

Indeed, most people don’t understand quiet quitting, which involves working on a job for only a defined number of hours or doing just what’s necessary. In many situations, people quit outright without having any backup plans. Or, they get fired for blatant disregard for the work they need to do. But that’s not the case here. 

Most layoffs were due to market changes. With businesses moving online, retail and sales personnel must also move online. Online teaching, sales assistance, and similar positions are replacing in-person or -store sales work.

Regarding distribution and sales, 53% of Americans reported they trust their local influencers more than any brand ambassador, advertisement, or company campaign. This opens up other job positions to replace the traditional ones. 

Image of a man in a suit sitting behind a desk.
Business owners frequently forget that their employees are as much a stakeholder in a company as their shareholders.
Source: Icons8 Team via Unsplash.com

Heading Toward a Recession

The US technically entered a recession this summer. However, the simplest recession indicators are yet to change. While industry leaders were quick to point out that two consecutive months of negative GDP growth didn’t indicate a recession, they’re less hopeful now. 

David Solomon, CEO of Goldman Sachs, recently admitted that a full-blown recession might be coming. He further called on companies to tread cautiously. His remarks mirror JPMorgan Chase’s Jamie Dimon comments from last week.

Such announcements might have nudged tech companies to trim down their spending. Underperforming projects, like physical stores or novelty research, have taken the back seat. Companies may also scrap these in favor of core business improvements.

Microsoft Layoffs Do Not Indicate a Crash

The recession is already spilling out globally. It’s now affecting the US’s biggest trading rivals, including China. But, unlike the ‘08 housing crash, the current recession only represents a shrinkage in business.

Microsoft’s stock price may be USD100 less than a year ago, but it’s still USD100 more than it was in October 2019. And, the wages and material costs did not jump 50% to drive such prices forward.

US employment rates remain stable at 60.1%, only 1% lower than pre-Covid numbers. Unemployment has reached pre-Covid numbers at 3.7%, which are all good indicators for the public. The only cohort impacted by this is investors, who might not see as big returns as promised during the 2021 rise.

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