Tech braces for layoffs at startups, but the biggest firms keep hiring
A Boston startup laid off nearly one-third of its employees this week. Insiders and economists say others will follow.
A week ago, Susan Jacobs was wooing a new class of interns and interviewing engineering candidates for the Boston-based business-travel startup Lola. Now she's scrambling to line up her own interviews; Jacobs was one of 34 people Lola laid off this week as coronavirus wreaks havoc on the economy.
"I was shocked," said Jacobs, an engineering manager who previously worked for Oracle and Fitbit. "But I mean, I completely understand why."
Jacobs and her former co-workers are among the first full-time tech employees in the United States to lose their jobs to COVID-19. More will soon follow, especially at small and early-stage startups, say insiders and economists.
Sam Altman, CEO of OpenAi and an adviser to the Y Combinator accelerator, said he's particularly concerned about layoffs at startups that "are low on runway" and "cannot get profitable and don't think they can raise money fast enough."
He said he expects to be hearing about layoffs at those firms "in a couple of weeks."
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Even before coronavirus landed in the U.S., financial analysts were predicting a post-WeWork reckoning for startups with sky-high valuations and rapid cash-burn rates. And some tech incumbents like Cisco and Expedia were already warning of layoffs, testing what happens when a corporate restructuring collides with a crisis.
Now anonymous threads on Blind and platforms like layoffs.tech abound with gossip about looming cuts, and investors and startup founders are posting prognostications about how a recession could trigger widespread cost-cutting and layoffs. Spreadsheets are being circulated online to showcase the credentials of tech workers suddenly back on the job market.
But the situation looks very different for employees at the largest tech firms. Even in tech hubs hardest hit by COVID-19 — including Silicon Valley and Seattle — companies like Google, Apple, Lyft, Uber and Adobe have all posted thousands of new jobs in recent weeks as residents shelter in place.
Large, established companies are generally better equipped to withstand economic downturns. They can slash expenses by canceling projects or cutting ties with contractors, freelancers and hourly workers before they have to turn to layoffs for full-time employees.
And tech companies are better positioned than most. The ability of many white-collar tech workers to do their jobs remotely, combined with a surge in demand for many online services among users stuck at home, gives software-oriented companies a huge advantage over the travel industry, restaurants and other sectors, analysts at Glassdoor and LinkedIn said.
Guy Berger, an economist at LinkedIn who previously worked on Wall Street, said the inherent mobility of software-centered work gives the tech sector a big advantage right now. "Tech in general is more suited to this big shift to remote work than a lot of other industries," he said. This is particularly true of large, publicly traded tech companies that have ample cash on hand, such as Apple and Google. They're more insulated from short-term economic downturns.
"This is not going to last forever," Berger said, adding that when shelter-in-place restrictions are eventually lifted or relaxed, he expects to see high demand for many industries and an appetite among consumers of all sorts. "This is really about surviving for brief, intense periods" of distress, he said.
Protocol asked more than a dozen tech companies whether they had laid off any full-time or contract employees or had plans to do so soon, what resources they may be making available to staff concerned about their job security, and whether they had sought state or federal government financial support.
An IBM spokesperson said the company has not laid off anyone as a result of the COVID-19 outbreak, or sought state or federal assistance. "What we have done is to contribute to our communities, while also running our business as virtually as possible," said IBM spokesperson Edward Barbini.
An Amazon spokesperson, meanwhile, said the company remains committed to hiring additional blue-collar workers to staff its buzzing fulfillment centers around the country. As more and more people buy essential household supplies online, Amazon and many of its retail partners have seen an increase in sales in recent weeks.
Spokespeople for Airbnb, Oracle, Facebook, Google, Apple, Palantir, Uber, Lyft, Cisco, Microsoft and Intel either declined to comment or did not respond.
During the last recession, unemployment in Silicon Valley spiked more than 11% in the summer of 2009. In addition to tech sectors like sales and marketing, the cuts also hit professional services firms, vendors who provide office workers and other related fields.
Daniel Zhao, a senior economist at Glassdoor, has charted two straight weeks of decline in new job listings across the economy — including a 17% hiring drop in the travel sector — but he said the tech industry has remained relatively flat.
Google, Microsoft, Facebook and others have also committed in recent weeks to paying hourly workers during COVID-19 office shutdowns. Other companies have not made such commitments, and it's unclear how long shelter-in-place orders may remain in effect. When it comes to proposed government interventions like paid sick days or emergency unemployment benefits, labor groups fear that freelancers and gig workers could be left behind.
In California, employers of all types are rushing to file mass layoff notices, which are required by law to be sent to the state at least 60 days in advance of planned layoffs. Since March 10, the state's Employment Development Department has received hundreds of such notices each day, creating a backlog. Typically it receives fewer than a dozen.
"It's crazy over here," said EDD spokesperson Loree Levy. With previous economic downturns, Levy said, the agency has had time to ramp up for an increase in unemployment insurance claims. That's not the case now. "This has been a sudden slam. I don't think anyone was prepared for the economy to come to a crawl all at once," Levy said. "We're facing an unprecedented claim activity."
To process filings from recently laid off Californians, Levy said the agency is asking existing staff to work overtime (seven days a week, in some cases), as well as inviting back recent retirees who are familiar with the byzantine state rules for categorizing types of employees and their eligibility for temporary financial support. "It's all hands on deck, here," she said.
Glassdoor's Zhao said it will take weeks or months to fully grasp COVID-19's toll on jobs. The tech industry may be obsessed with data, but government job reports aren't built to track economic shocks in real time. National job numbers for March are expected to be released on April 3, and April numbers slated to post on May 8 could give an indication of the lasting impacts of COVID-19.
"Government data is very reliable, but it's also slow," Zhao said.
In the absence of updated government job numbers, companies like Glassdoor, LinkedIn and OpenTable are releasing their own data. Each platform has its quirks, but they all offer a more immediate insight into rapid declines in service and hospitality work, plus indicators of where professional industries like tech could go from here.
LinkedIn is tracking hiring trends in several key industries, many with indirect impact for the industry, such as hospitality and restaurants. LinkedIn's more than 660 million users give the company a near live-time window into hiring trends.
Data the company published Friday showed that hiring in China and Italy plummeted in the days after the countries issued quarantines for citizens. "We anticipate hiring growth in the U.S. will begin to show a similar sharp decline as soon as next week," LinkedIn economist Karin Kimbrough said in a blog post accompanying the data.
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Still, in times of downturn, LinkedIn faces challenges when it comes to obtaining accurate, up-to-date information, since its data is derived from when users update their profiles. Many people who are laid off don't update their profiles on the site until after they find their next job. And in the early days of the coronavirus pandemic here, that generally hasn't happened yet.
Outside Boston, Jacobs is taking video interviews for new jobs as Massachusetts navigates a state of emergency, malls close and restaurants shift to takeout-only. With kids at home across the country and school in many places shut down for the foreseeable future, she's shifted her approach to job hunting.
"What I'm more looking for is a recession-proof company," Jacobs said. "I'm thinking biotech or ed tech."