Big Tech seems convinced that the global economy is headed for recession.
Silicon Valley seems to be guessing that the economic slowdown will be sharp, if not brutal. Tech companies and venture capital firms that back tech startups don’t want to be caught off guard, especially when economic data isn’t very reassuring.
Inflation, affecting both businesses and consumers, remains at levels not seen in 40 years. According to Bureau of Labor Statistics data released on July 13, the headline consumer price index for June rose 9.1% from a year earlier and from the pace of 8.6% recorded in May.
The June reading was the fastest since December 1981. This situation suggests that the Federal Reserve will continue its policy of very aggressive rate hikes, which in turn will weigh on consumption, the prime engine of American growth, experts say.
In addition, the appreciation of the dollar against other currencies is likely to reduce the earnings that multinational companies generate in foreign markets. Big Tech is present in most countries worldwide.
Apple plans to slow down the hiring
Multinationals are looking to brace for what Mark Zuckerberg, Meta Platforms chief executive, is predicting will be “one of the worst downturns we’ve seen in recent history.”
Apple (A`L) – Get Apple Inc. report plans to slow hiring and spending pace in certain departments in 2023. According to Bloomberg News, this decision reflects the iPhone maker’s heightened caution during uncertain times.
These changes won’t affect all teams, as Apple still plans to launch its next big thing, a virtual reality headset, in 2023. This will be the first major product since 2015.
CEO Tim Cook’s group’s decision is a worrying alarm, as Apple has always managed to navigate through crises without taking a major hitch. The Cupertino, California-based tech star managed to beat analyst financial estimates during the Covid-19 pandemic and unveiled the iPhone, which launched in 2007 at the onset of the financial crisis.
Apple did not immediately respond to a request for comment.
Social media giant Meta (META) – Get report from Meta Platforms Inc these days continues to reduce costs.
Meta just changed its expansion plans, notably dropping an idea to build new offices in New York. Meta just vacated a 300,000 square foot (27,870 square meter) space at 770 Broadway, a building in the East Village where Meta already has premises.
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Meta, parent company of Facebook, Instagram and WhatsApp, is also suspending plans to build new offices in Hudson Yards, West Midtown.
‘New opportunities’
“There are often a number of reasons why we would not proceed with a particular deal, including office use,” Jamila Reeves, a spokeswoman for Meta, said in an emailed statement.
“Recent years have brought new opportunities in terms of how we connect and work. We are working to ensure we are making targeted, balanced investments to support our strategically most important long-term priorities.”
Reeves added that the company “has a strong commitment to New York and… [looks] look forward to opening The Farley in the coming months and further establishing our local presence.” The Farley is a building near Pennsylvania Station.
Bloomberg News was the first to report on Meta’s new plans.
Prior to those decisions, the company had decided to hire 6,000 to 7,000 new engineers in 2022, up from an initial forecast of 10,000 new hires, TheStreet learned on July 1. That’s a 30% to 40% revision.
In May, a source told TheStreet that the social media giant plans to end, or in some cases slow down, hiring for most middle-to-senior positions. The goal was to revise priorities and bring hiring targets in line with current market estimates and pace, the source said.
Other tech giants have also taken austerity measures in anticipation of a worsening economic situation. alphabet (Google) – Get report from Alphabet IncGoogle’s parent company, will scale back hiring for the remainder of the year in the face of a possible recession.
“We will slow the pace of hiring for the remainder of the year while supporting our key opportunities,” CEO Sundar Pichai wrote in a recent memo to employees.
“For the remainder of 2022 and 2023, our hiring focus will be on technical, technical and other key roles, ensuring the great talent we are hiring aligns with our long-term priorities.”
Software giant Microsoft (MSFT) – Get the Microsoft Corporation Report also hedges against an economic slowdown by cutting hiring.
Before new positions can be made available, employees must obtain executive team approval from Rajesh Jha, executive vice president, responsible for Office and part of Windows.
Fewer employees will be hired to work on the Windows, Office, and Teams chat and conferencing software groups.
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