In the past week, Apple has downsized about 100 contract recruiters. There is one main reason for laying off that many recruiters, and it’s usually because the company doesn’t have plans to hire new personnel. Traditionally, large firms, like Apple, bring on contract recruiters since there is an overwhelming need to hire, especially when it’s a hot job market. It’s also an ominous sign that Apple’s outlook on the economy has darkened, and now’s the time to reign in costs prudently. Now that things are cooling down, there is no need for these contract recruiters.
The large, leading tech company is not alone in its belt-tightening measures. A tidal wave of layoffs has been announced over the last quarter. Major tech companies, including Microsoft, Amazon, Meta, Tesla, Oracle, Lyft, Opensea, Substack, Robinhood and many others, put in place hiring freezes, allowing attrition without replacement, rescinding offers and curtailing recruiting efforts. According to Layoffs.fyi, a tracker for corporate downsizings, about 527 startups have laid off 71,175 employees in 2022.
It’s Not Just Apple That’s Cutting Back
Mark Zuckerberg, CEO of Meta, told his staff that the United States is experiencing one of the “worst downturns that we’ve seen in recent history.” In response to a recessionary-like environment with record-high inflation and rising interest rates, the social media platform significantly scaled back its aggressive global hiring to build the metaverse, which was Zuckerberg’s dream for reinvigorating the company.
Emblematic of the current mood, the chief executive said, “I think some of you might decide that this place isn’t for you, and that self-selection is OK with me,” according to the New York Times. Zuckerberg added what seemed like a threat or foreshadowing of what’s to come, “Realistically, there are probably a bunch of people at the company who shouldn’t be here.”
How The U.S. Get Here And Why There Will Continue To Be Layoffs
To stave off financial disasters for families and businesses, the U.S. government and Federal Reserve Bank flooded trillions of dollars into the economy by both the U.S. government. Interest rates were artificially kept at record lows.
The Fed allowed this to go on for too long, calling inflation only “transitory.” Recognizing its misjudgment, the Fed announced it would put in place policies to cool down the economy to break the back of inflation.
There was an ugly downside to the largesse. All the cash sloshing through the system, along with cheaply available capital, helped keep the economy running, but led to rampant inflation not seen since 40 years ago. The results of this program include a slowing economy and massive job losses.
In a dire prediction, Lawrence Summers, former U.S. treasury secretary and president of Harvard University, said in an interview with Bloomberg that the U.S. jobless rate would need to rise above 5% for an extended period of time to curb runaway inflation. Summers predicted, “We need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment.”
The Battle To Return To The Office
Apple announced its new hybrid working model. The tech giant told its software engineers and employees that they would be required to return to their offices for at least three days a week commencing September 5. Apple, compared to other tech firms, such as Airbnb and Twitter that offer remote work “forever,” has been an ardent promoter of people being in the office.
The gauntlet has been laid down for Apple employees. The staff has consistently pushed back at every attempt made by CEO Tim Cook to get them to return to their plush offices that offer an array of amenities that are better than what most workers have at their apartments.
The highly compensated software engineers and employees have ignored Cook’s entreaties, basically saying, “We’ll continue working remotely; thank you very much!”
When the job market is blazing hot, a tech rockstar can push for $800k in total compensation and tell their boss that if they feel they are not being treated fairly, they’ll switch jobs for a significant salary increase. With the threat of top talent quitting, Apple and other tech companies will yield to their demands.
However, this privilege only lasts as long as the economy is strong. If and when the economy contracts, there will be significant layoffs as companies cut costs in response to Powell’s quantitative tightening.
What Happens When The Market Softens
Once the market weakens, everything changes. There is no bid from the other company. The software developer has lost their leverage. Without other opportunities, they’ll contemplate coming back into the office for at least a couple, if not more, days to ensure the safety of their job.
Apple’s downsizing of recruiters was the equivalent of a baseball pitcher throwing a hard fastball at the head of the batter. It’s meant as a warning sign. The layoffs are management’s way of saying, “Don’t get too complacent. You may not be as safe as you think you are.”
With the war for talent and Great Resignation, there have been significant bumps in pay. As the economy softens, it’s not feasible for compensation to increase forever. Companies will cut back on salaries, bonuses, personal expenses, travel allowances, free food and perks. The downsizing of recruiters is a foreshadowing of what may come in the future.
Source: Forbes
