Big tech seems convinced that the global economy is heading for a recession.
Silicon Valley appears to be estimating that the economic slowdown will be sharp and even brutal. Tech companies and venture capital firms that fund tech startups don’t want to be caught off guard, especially if economic data isn’t too reassuring.
Inflation affecting businesses and consumers remains at levels not seen in 40 years. The headline consumer price index climbed 9.1 percent in June from a year earlier, up from 8.6 percent in May, according to data released by the U.S. Bureau of Labor Statistics on July 13.
The June reading was the fastest since December 1981. Experts say the situation suggests the Fed will remain very aggressive in its policy of raising interest rates, which in turn will dampen consumption, the first engine of U.S. growth.
In addition, a stronger dollar against other currencies should hurt the revenue multinationals generate in foreign markets. There are large tech companies in most countries around the world.
Apple plans to slow hiring
Multinationals are hoping to brace for what Meta Platforms CEO Mark Zuckerberg expects to be “one of the worst recessions we’ve seen in recent history.”
apple (AAPL) – Get Apple Inc. Report It plans to slow the pace of hiring and spending in some sectors in 2023. According to Bloomberg, the decision stems from the iPhone maker being more cautious in times of uncertainty.
The 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 its first big product since 2015.
The decision by CEO Tim Cook’s team is a worrying alarm, as Apple has managed to weather the crisis without much impact. The Cupertino, California-based tech giant managed to beat analysts’ financial expectations throughout the covid-19 pandemic and launched the iPhone in 2007 at the start of the financial crisis.
Apple did not immediately respond to a request for comment.
social media giant Meta (META) – Get Meta Platforms Inc. Reports Cost-cutting continues these days.
Meta has just revamped its expansion plans, specifically dropping the idea of a new office in New York. Meta just gave up 300,000 square feet (27,870 square meters) of space at 770 Broadway, the East Village building where Meta already owns the site.
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Meta, the parent company of Facebook, Instagram and WhatsApp, also paused plans to build a new office in Midtown West Hudson Yards.
“There are often a number of reasons we don’t make a particular transaction, including office utilization,” Meta spokeswoman Jamila Reeves said in an emailed statement.
“The past few years have brought new possibilities for how we connect and work. We are working hard to ensure we make focused, balanced investments that support our most strategic long-term priorities.”
Reeves added that the company remains “firmly committed to New York and [looks] Looking forward to opening Farley in the coming months, further strengthening our local footprint. The Farley is a building near Penn Station.
Bloomberg News was the first to report on Meta’s new plans.
TheStreet learned on July 1 that before those decisions were made, the company had decided to hire 6,000 to 7,000 new engineers in 2022, compared with an initial forecast of 10,000 new engineers. This is a 30% to 40% correction.
In May, a source told TheStreet that the social media giant was planning to halt or in some cases slow hiring for most mid-level and senior roles. The goal is to revise priorities and align hiring targets with current market estimates and cadences, the sources said.
Other tech giants have also resorted to cost-saving measures in anticipation of a worsening economy.letter (GOOGL) – Get the Alphabet Inc. reportGoogle’s parent company will slow hiring for the rest of the year in light of a potential recession.
“We will slow down our hiring for the rest of the year while still supporting our most important opportunities,” CEO Sundar Pichai wrote in a recent memo to employees.
“For the remainder of 2022 and 2023, we will focus our hiring on engineering, technology and other key roles and ensure that the top talent we recruit is aligned with our long-term priorities.”
software giant microsoft (MSFT) – Get Microsoft Corporation Reports It also hedged against an economic slowdown by laying off workers.
Before a new role can be offered, employees need permission from the team led by Rajesh Jha, executive vice president responsible for Office and some Windows.
Fewer employees will be hired to work in the Windows, Office and Teams chat and conferencing software groups.