American job losses in tech sector
Alphabet, the parent company of Google, has announced cuting 12,000 jobs, even as other major big tech companies did the same, with Amazon cuting 18,000 jobs, Meta, the parent company of Facebook, cuting 11,000 and Microsot 10,000. The job losses in these companies are all in the United States, confirming that 2023 is going to be a tough year for the economy.
The Federal Reserve had been raising interest rates through 2022 in its bid to tame inflation, and observers are likely to blame the Fed for the looming recession. But the tech companies have cited other reasons, one of them being rising competition, especially from the Chinese tech enterprise, Tiktok, apart from internal competition, as between Microsot and Google. Downsizing to become a more profitable company is one of the standard strategies of businesses, but the move pinches hard and creates social unrest when the economy is not doing well, and eveyr job that is cut adds to the economic downturn. The job cuts are partly based on the fears of a recession and this would also hasten recession, a vicious circle. Analysts say that the Alphabet decision to cut jobs would save the company $2.5 billion to $3 billion in costs.
The Alphabet Workers Union said, “It’s appalling that our jobs are first on the chopping block so shareholders can see a few more points in a chart next quarter.” Predictably, Sundar Pichai, Alphabet’s boss, rationalised the decision, saying the aim is to “sharpen our focus, reengineer our cost base, and direct our talent and capital to our highest priorities.”
The American economy has been fluctuating rather violently between shortage of labour in the immediate atermath of the liting of COVID curbs and loss of jobs in 2022 in the tech segment. The reasons for rising inflation still remain unclear. There was of course the Covid-related supply chain disruptions and the decrease in consumer spend, but then inflation shot up forcing the Federal Reserve to raise interest rates, squeezing investments in businesses and in hiring. The war in Ukraine had impacted oil prices, but this was not the sole reason for the spurt in inflation.
What is ailing American economy seems to be much more fundamental. Some segments of the economy like the tech segment have been doing well, especially because of the rise in digital economy due to COVID. But many traditional parts of the economy like manufacturing and services are in a state of neglect. The American dependence, like in Europe, on cheap Chinese manufactures seems to be affecting employment in the Western economies. The tech giants in America, as in other parts of the world, cannot create jobs for the whole working population. As a mater of fact, the demand in the tech sector is for a highly skilled workforce, and most of them in America, at least, are taken by Asian immigrants. That leaves out many of the local residents out of the job market and their purchasing power is reduced. What America perhaps needs is a major rethink on how to restructure the economy in a way that it could meet the demand for employment in the country. If American manufacturing is to be outsourced to Asian countries with cheap labour, and if the employment demand of the tech sector is limited, then there would be a large number of people who would depend on social security. And there is also the fact that Americans spend more than they earn, and the largest economy in the world is also the most indebted. What seems to hold America is its strong dollar, and even the dollar is under pressure because of the search of other countries for non-dollar alternatives.