Facebook, Twitter are pulling back on hiring—Will others follow?
After years of adding jobs at a rapid pace, some of America’s fastest-growing companies have signaled in recent weeks that they plan to take a more cautious approach to bringing on new workers. The shift by these technology giants raises questions about the direction of the overall U.S. job market and comes during a period of volatility in the stock market amid concerns over rising interest rates.
Economists cautioned that, overall, the job market remains robust, with the unemployment rate in April at 3.6%, layoffs at historically low levels and many companies still eager to bring on more workers—if they can even find them. While employment in the tech sector has grown rapidly and intensified competition for talent across the country, the industry employed about 8.7 million people at the end of 2021, or 5.7% of the overall U.S. workforce, according to CompTIA, an industry trade group.
The slowdown in hiring at some companies suggests that executives are becoming more risk averse and “less prepared to tolerate sort of growth at all costs," said Julia Pollak, chief economist at the job site ZipRecruiter. “Many of these companies grew so fast in the pandemic; perhaps they overextended a little."
The shifting hiring landscape in technology has worried some workers, who have expressed concerns on sites such as LinkedIn about rescinded offers or difficulties getting hired. While few large technology companies have announced layoffs, many have said they want to do more to hold down spending. Facebook parent Meta Platforms Inc. said last week it would sharply slow its hiring after it more than doubled the size of its workforce since 2018.
Twitter CEO Parag Agrawal told staff in a memo Thursday that the company would pause hiring and review the job offers it has made to candidates. Mr. Agrawal said Twitter, which agreed to be acquired by Elon Musk for $44 billion, planned to spend less on contractors and consultants, travel, marketing and other costs.
Uber CEO Dara Khosrowshahi told staff in a note this month that the company will “treat hiring as a privilege" and be more deliberate about when and where it adds new employees. Mr. Khosrowshahi said the company needed to focus on profitability, and that the market and investor sentiment had shifted.
Some companies that grew earlier in the pandemic have run into trouble. Online car dealer Carvana Co. told employees that the company would cut 12% of its workforce, or around 2,500 workers. Fitness-equipment maker Peloton Interactive Inc. said in February that it would cut 2,800 jobs, including about 20% of its corporate positions.
At smaller companies and startups, many entrepreneurs will likely be more prudent about how to spend their company’s cash in an era when it may not be as easy to raise large sums of money quickly, said Vinod Khosla, a prominent venture capitalist. That may cause some CEOs to think differently about whether to add new positions or expand their teams, he said.
“There is definitely caution among the smart entrepreneurs," Mr. Khosla said. “Entrepreneurs are pretty smart. When capital is cheap, they waste it," spending a bit more to gain an advantage over a rival or to increase the size of their market, he said.
By contrast, now, “less money will increase capital efficiency," Mr. Khosla said.
The shifting focus extends beyond tech. At Scotts Miracle-Gro Co., CEO Jim Hagedorn told investors last week that the company aimed to reduce its overhead expenses by roughly 10% ahead of the next fiscal year. Mr. Hagedorn said the company would “run skinnier" and be “more mindful of redundant roles, processes and other structural issues that can lead to inefficiencies."
Among entrepreneurs, many conversations have turned more recently on how to conserve funds, said Maria Colacurcio, chief executive of the technology company Syndio Inc., an analytics platform that helps employers identify and fix pay discrepancies. “Everyone’s shifting to cash preservation, runway, ‘I don’t want to raise money in this environment,’" Ms. Colacurcio said. “That’s what my peer set, what they’re all talking about."
But Ms. Colacurcio said she had seen few of her company’s large-employer clients pull back on hiring, and said her own company, which employs around 150, still planned to hire more than 30 people by year-end.
Across the economy, job growth has remained strong in white-collar professions, manufacturing and other industries, ZipRecruiter’s Ms. Pollak said. “Employers are in no hurry to get rid of workers. On the contrary, they are hungry for new candidates and they are holding on to the workers they have for dear life," she said.
Still, the moves at large, well-known technology companies were likely to draw attention and have an outsize effect on sentiment about the job market, particularly in an environment when many are anxious about what is next for the economy, she said.
“People are nervous," she said, “and they’re looking for all signs and signals of what lies ahead."