The rose-colored glasses have come off at Meta. The company, which ballooned its workforce during the pandemic, was forced to make massive cuts this week as critics bemoaned the excessive growth that led the social media behemoth down this road, to begin with.
The company laid off 13% of its staff on Wednesday, roughly 11,000 employees, with Mark Zuckerberg taking the blame for miscalculating the financial boon during COVID’s lockdown days as something permanent, leading him to rapidly expand Meta’s businesses and workforce.
Zuckerberg’s critics have accused the company of overhiring and heedlessly taking advantage of pandemic trends like increased online communication and shopping, and broadly just virtual living, which didn’t continue in earnest despite Zuckerberg’s predictions.
“They grew so quickly and were so lavish with perks,” Zaven Nahapetyan, a former senior engineering manager at Facebook who left last year, told The Financial Times. He told the publication that after seeing the number of teams Meta employed that didn’t need to be there and the products they developed that no one even knows about, he wasn’t surprised “reality is now catching up with them.”
“They absolutely knew they were being wasteful,” tech investor Kevin Landis from Firsthand Funds also told FT. At the same time, however, the “land grab” for talent Meta was engaged in was absolute “the right thing to do,” he said.
The investments Meta eagerly made in Facebook, Instagram, and the Metaverse came as a response to the boom of Chinese-owned TikTok. Zuckerberg said in an October interview that he had failed to anticipate how people share videos on social media and missed out on the trend of A.I.-driven content curation that’s led to TikTok’s success.
Meta isn’t alone in slashing jobs on the heels of weaker business performance as the economy continues its downturn. Elon Musk unrelentingly took the hammer to roughly half of Twitter’s workforce after closing his deal to acquire the company earlier this month. Snap cut 20% of its workforce in September, and layoffs have also come for Coinbase, Netflix, Robinhood, and Telsa this year, to name a few. Even Google has shuttered teams, putting employees out of work.
But Meta feels different because of its soaring ascension as it aggressively hired in a mad dash for talent to propel the company to fly closer and closer to the sun.
To put it in perspective, even after carving down its headcount, Meta still employs more people than it did last year. Benedict Evans, an independent tech analyst formerly of the VC world, tweeted Wednesday that the 11,000 layoffs put Meta’s workforce back at December 2021 levels.
Meta employed just south of 72,000 people at the end of December 2021, a 23% jump year-over-year. The reduction on Wednesday means its workforce fell from more than 87,000 employees at the end of the third quarter to somewhere in the realm of 76,000.
Unfortunately now, though, the company—and its employees—are crashing down to Earth. One former Meta employee described the mood inside the company to FT as “big chaos” and “a shit show.”
On Twitter, former Facebook product designer Bobby Goodlatte lamented that the company’s workforce never ballooned to the level it did, to begin with.
“I’ve never understood why FB needs 20,000 employees. And less so the 70,000 employees Meta has now,” Goodlatte, now co-founder of VC Form Capital, wrote. “These businesses just don’t require that many people.”
IKEA retailer Ingka Group is launching a 10 million euro ($10 million) social fund and bigger staff discounts to support employees struggling to cope with higher living costs.
Ingka, the owner of most IKEA furniture stores, said the fund would support its "most cash-strapped" staff throughout its fiscal year to the end of August.
"Each Ingka Group country will give support to co-workers who may need 'one-off' financial assistance to, for example, pay electricity bills or for housing costs," it said in a statement on Thursday.
A group spokesperson said the fund would be available in all Ingka's 31 markets, and the money would not be a loan. All staff would be able to apply and the company would assess on a case-by-case basis how much they may receive.
The employer of around 170,000 across 31 markets said it would also double staff discounts to 30% in its store-in-store food markets and on more than 2,000 energy-saving products such as water-saving taps, light bulbs, bedspreads, and appliances.
"The cost-of-living crisis is hitting many people hard. Some more than others," it said. "We want to be able to support co-workers through this time while balancing the needs of our business, always guided by our values."
Companies across Europe are implementing ways to help staff with surging food and energy bills over the winter.
The Ingka spokesperson said it was difficult to say at this point how many would seek help from the fund.
"Like many people and businesses around the world, we find ourselves in a new reality, triggered by the energy crisis and rising inflation," she said.
"This extra support is meant to support co-workers faced with unforeseen costs they couldn’t possibly have planned for."
The company was also looking into other additional compensation enhancements after it invested in growing employees' compensation and benefits over the last several years, she said.
The number of Americans applying for jobless benefits rose slightly last week, but the labor market remains healthy despite job cuts that have begun to spread across industries most affected by soaring interest rates, such as housing and technology.
Unemployment claims for the week ending Nov. 5 rose by 7,000 to 225,000 from 218,000 the previous week, the Labor Department reported Thursday. The four-week moving average declined by 250 to 218,750.
Applications for jobless claims, which generally track layoffs, have remained historically low this year, even as the Federal Reserve has cranked up its benchmark borrowing rate six times in its effort to cool the economy and tame inflation.
A strong job market is deepening the challenges the Federal Reserve faces as it raises interest rates at the fastest pace since the 1980s to try to bring inflation down from near a 40-year high. Steady hiring, solid pay growth, and low unemployment have been good for workers, but have contributed to rising prices.
The government reported Thursday that consumer inflation reached 7.7% in October from a year earlier, the smallest year-over-year gain since January. Excluding volatile food and energy prices, “core” inflation rose 6.3% in the past 12 months and 0.3% from September.
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Those numbers are still high but came in lower than economists expected, giving a sliver of hope that the Fed will ease up on future rate hikes.
Last week, the Fed raised its short-term lending rate by another 0.75 percentage points, three times its usual margin, for the fourth time this year. Its key rate now stands in a range of 3.75% to 4%, the highest in 15 years.
Fed officials have admitted that part of their strategy is to loosen up the U.S. job market, which has been adding jobs at a furious pace the past two years after COVID-19 hit the U.S. and wiped out more than 20 million jobs.
The Labor Department reported last week that American employers added a healthy 261,000 jobs in October and that the unemployment rate rose from a five-decade low of 3.5% to 3.7%. Fed officials have signaled that the unemployment rate needs to be at least 4% to slow inflation, a threshold that could be met soon as more and more high-profile companies announce layoffs.
Facebook parent Meta said this week it was laying off 11,000 people, about 13% of its workforce, amid slumping revenue and broader tech industry woes. Twitter laid off about half of its 7,500-person staff after Elon Musk took over the company last week. The online real estate broker Redfin announced that it was laying off another 862 employees on Wednesday — after slashing 470 jobs in June — with the housing market in an eight-months-long slump. Redfin has shrunk its workforce by more than 25% since April and rival online broker Compass has also laid off hundreds of workers this year.
The Labor Department reported Thursday that the total number of Americans collecting unemployment aid rose by 6,000 to 1.49 million for the week ending Oct. 29, a seven-month high, but still not a troubling level.
After a hiring spree for technical jobs during the pandemic, some big-name companies, including Meta, Twitter, and Stripe, are changing course and starting to lay off workers. The layoffs could be particularly hard for workers on H-1B visas, who will need to find a job within 60 days or leave the US unless they change their visa status.
Tech companies in the US depend heavily on foreign workers, particularly from India and China. For years, these companies have said there’s a shortage of workers with the needed technical skills, so they turn to the H-1B program to hire workers from overseas to fill specialty roles.
So what’s next for these workers if they are no longer needed by their employers?
The options for tech workers on H-1B visas
Immigration lawyers say that laid-off workers who intend to stay on an H-1B visa have a 60-day grace period in which they need to find and file another H-1B visa from another employer. If not, they will have to leave the country. Other options include going back to school and changing their status to a student visa to buy more time. Some may choose to apply for a B-2 visa to extend their time in the US.
For employees on H-1B visas who are on track to get a green card, losing their job could hurt their chances of receiving the green card to become a permanent resident of the US, unless they are far along in the approval process. A layoff can be particularly disruptive for people in this group, as many have mortgages or are putting kids through college in the US, says Poorvi Chothani, the founding partner at LawQuest, an immigration law firm based in Mumbai, India.
The current tech hiring landscape
How hard will it be for affected workers to get new jobs? It depends in part on where they are willing to go.
Chothani notes that the skills of these workers are in high demand, often in excess of what’s available through the H-1B program. She says clients tell her there aren’t enough qualified workers willing to take up jobs, for instance, in North Dakota or Idaho. “There is room for them to get jobs,” she said.
The US labor market is still tight overall, as layoffs have been concentrated either at big tech companies or unprofitable ones.
“We know that there are many H-1B workers who will be affected by that layoff,” said Richard Block, a partner at Lewis Brisbois, who focuses on business immigration law. “My suspicion or belief is that there are still quite a few US employers that would be willing to hire those individuals.”
He shares that one of his clients recently changed to a policy of no longer sponsoring H-1B workers, but was having such difficulty finding workers with the necessary skills that they reverted to their old policy.
Immigration outflow to Canada
Though the Biden administration has loosened restrictions on the number of visas issued to immigrants, backlogs on obtaining a visa, which worsened during the pandemic, continue, with some wait times extended to years.
As a result, lawyers say layoffs in tech could lead to more workers heading to Canada, where they can find friendlier immigration policies and typically face shorter wait times for visas than in the US. The timing, at least, would be good. Canada announced recently it is raising its immigration targets amid a labor shortage.