Tech industry expecting more layoffs, but say hiring coming too this year

Hey there, time traveller!
This article was published 17/01/2024 (977 days ago), so information in it may no longer be current.

TORONTO – Tech’s biggest names spent last year in layoff mode and if the last few weeks are any indication, that pattern is continuing into this year.

Two weeks into January, major tech firms such as Google, Amazon, Discord, Instagram and Duolingo have already made job cuts and several other firms are rumoured to soon be following suit.

Even as industry members and observers expect the cuts to continue, they’re optimistic that layoffs won’t hit last year’s levels.

“I don’t think that this is going to be anywhere close to the layoffs of 2023,” said April Hicke, co-founder of women’s tech collective and talent organization Toast.

She views many of the job cuts carried out in January as companies streamlining their operations to make their businesses even more revenue-focused, especially as advances in artificial intelligence arise and companies get a better handle on how COVID-19 has shaped their futures.

The COVID-19 pandemic brought a boom in tech hiring as more people spent time at home on their devices and as capital remained easy to access while interest rates were low.

But when lockdowns and other restrictions related to the health crisis began to lift, many tech companies realized their businesses would not continue to grow at the same levels as they had during the pandemic’s onset.

At the same time, investors became more tight-fisted with their funding and interest rates were aggressively hiked to offset inflation. They have yet to be lowered.

“A lot of tech companies are highly leveraged, so when interest rates are high, they get squeezed and they have to cut costs and sort of get lean,” said Tu Nguyen, an economist with accounting and consultancy firm RSM Canada.

“They can’t afford to just have a lot of people without generating the maximum amount of output and profitability, so with a high interest rate, they do have to cut staff.”

That’s exactly what Canadian companies such as Shopify Inc., Lightspeed Commerce Inc. and Hootsuite Inc. did last year, along with giants like Amazon, Google and Meta.

By the end of 2023, aggregator Layoffs.fyi had counted 262,582 workers globally laid off by 1,186 companies.

It has so far counted 7,528 employees laid off globally at 48 tech companies in January.

But “these layoffs of the large major tech companies are not all necessarily negative for Canadian companies,” said Benjamin Bergen, president of the Council of Canadian Innovators, an innovation policy organization supporting startups in the country.

The cuts have been a good opportunity for Canadian firms to pick up talent that would be harder to lure away from larger multinational companies.

While big names like Google and Amazon have so far dominated layoff talk, smaller firms like Toronto-based artificial intelligence and biomedical startup BenchSci have reduced their head count too this year and news aggregation startup Artifact recently announced it’s closing down.

“The companies that I think that are most feeling the pinch are the ones that are scaling up but have not achieved cash-flow positive operations, and that’s where I think maybe in the domestic Canadian market, you’re going to see more of the layoffs,” said Bergen.

Nguyen felt the cuts will trickle in until about the middle of the year, when central banks start easing interest rates and companies get the confidence to hire again.

A fall 2023 survey conducted by the Council of Canadian Innovators found many tech organizations expected to be hiring in 2024.

“And in some cases, they’re double-digit head count increases,” Bergen said.

That’s in line with some of what Hicke is seeing.

“Companies that were a little more reluctant to hire through 2023 are starting to be a little more bullish,” she said.

Some 84 per cent of Toast’s clients engaged the organization in a talent search last year with the bulk of that work coming in the final two quarters.

Data, AI and machine learning roles were popular among job postings, but marketing and sales professionals were in the mix too, Hicke said.

This report by The Canadian Press was first published Jan. 17, 2024.

Companies in this story: (TSX:SHOP, TSX:LSPD)