(Daily Caller News Foundation) Executives across the tech industry overestimated the sector’s resilience following pandemic-era shifts in demand, leading to overstaffing at companies that has led to tens of thousands of employees getting laid off across the industry.
Co-founders of payment processor Stripe said they were “much too optimistic” about the health of the “internet economy” in a Nov. 3 email, announcing cuts of roughly 1,000 employees.
More recently, Meta CEO Mark Zuckerberg apologized to employees for overestimating the company’s success following a pandemic era business boom, forcing a cut of more than 11,000 employees, according to The Wall Street Journal.
“The tech sector relies heavily on short-term debt that constantly needs to be rolled over. Record-low rates (the Fed’s benchmark rate was .07% at the start of the year) have been a boon for the industry—particularly its stock prices—over the last couple years, but now higher rates (same benchmark is at 3.83%) are penalizing companies that took on significant debt,” Heritage Foundation economist E.J. Antoni said in a statement to the Daily Caller News Foundation.
“The lure of ‘free money’ caused many tech giants to borrow even though they had large cash reserves.”
More than 119,000 tech sector employees have already been laid off this year, according to layoff-tracking website Layoffs.fyi through Nov. 11. While the most losses came in recruiting, human resources and sales, even engineers and other roles were impacted, the website’s founder, Roger Lee, told CNN Nov. 9.
“Tech has been clobbered so much precisely because it has been seen as very immune to fluctuations in the real economy, but in the end, nobody is immune,” Nikolai Roussanov, professor of finance at the Wharton School of the University of Pennsylvania, told CNN.
“And that realization, I think, is important and perhaps what contributed to these sky-high valuations coming down pretty quickly.”
