Consumer prices in the United States rose 8.6% in May year-on-year, the highest since 1981. In response, the Fed has raised interest rates three times this year, the latest increase being largest since 1994.
With the evaporation of cheap capital, investors have become nervous and more cautious with their portfolios. As a result, stock markets and riskier assets around the world crashed, with tech companies bearing the brunt.
In a world where much international trade and debt is denominated in US dollars, the impact on the real economy is considerable. Everything from electricity tariffs to carpooling prices in Singapore have gone up.
TECH COMPANIES ARE CHASING GROWTH RATHER THAN EFFICIENCY
How have these factors contributed to tech layoffs?
During the pandemic, there was a big opportunity for tech companies to grow. Some companies spent a lot of money to grow, so efficiency was not the top priority. They hired aggressively to grow as quickly as possible.
To attract new talent, some offered such high compensation and benefits that they could have influenced the “big quit wave” – where employees chose jobs instead of the other way around. Companies like Twitter was among the first to encourage working from home. Others like Google have offered extra weeks of family leave – some like Amazon even subsidizing emergency childcare.
But in 2022, pandemic winners from Zoom to Netflix reported consumer growth below expectations. In the region, Grab has struggled with falling stock prices and has yet to reach profitability.
The recent layoffs are part of a cost-cutting exercise as tech companies now turn to efficiency.
As the industry matures, the number of new customers a tech company can acquire naturally decreases. Tech leaders saw this happen before and during their heyday, expanded their product offerings, and even expanded into other countries.