January 30, 2023

Microsoft has announced it will cut 10,000 jobs in coming months, with lay off notices going out Wednesday. Like many other tech and finance companies, it’s bracing for a recession this year.



ARI SHAPIRO, HOST:

Microsoft said today it’s laying off 10,000 of its employees. The company is the latest tech giant to make major cuts to its staff. And this layoff is the latest to stoke fears about a possible recession this year. NPR’s Bobby Allyn is reporting on what’s driving the shakeup in tech. Hey, Bobby.

BOBBY ALLYN, BYLINE: Hey, Ari.

SHAPIRO: Another day, another huge round of tech layoffs. What’s going on?

ALLYN: Exactly. So we’ve heard about Twitter, Facebook, Amazon. The list goes on. Tech companies are having a bit of a reckoning right now. Remember, the pandemic supercharged the tech industry. You know, we all moved more of our lives online. And the tech industry went on a hiring spree to catch up with the demand. But now, high inflation, a pullback in corporate spending and other factors has economists seriously worried about a recession, as you mentioned. And companies like Microsoft say they have no choice but to slam the brakes.

SHAPIRO: How did Microsoft explain this decision to lay off 10,000 people?

ALLYN: Yeah. In a note to employees, Microsoft CEO Satya Nadella pointed to the number of people Microsoft has hired in recent years. Since 2019 alone, it added 75,000 people to its workforce, which, of course, is extraordinary, right? Now, do the layoffs mean Microsoft is in some kind of trouble? I don’t think so, Ari. I mean, Microsoft is one of the most valuable companies in the world. It employs more than 200,000 people. But Nadella is basically reading the tea leaves here and saying, well, there might be a slowdown. So we’re bracing for that and now cutting 10,000 jobs.

SHAPIRO: So as these tech workers get laid off in companies across the sector, what do their prospects look like after they’re let go?

ALLYN: Better than most. One survey found that 8 out of 10 techies who are laid off find a new tech job within three months of starting their search. So that is to say the tech industry is downsizing in some parts but also hiring in other parts. Something else to note – tech relies heavily on immigrant workers. And when you’re on a visa that is tied to your job and then you’re laid off, the clock starts ticking for you to quickly find another employer sponsor. So that’s causing a scramble for a lot of people.

SHAPIRO: And for Microsoft specifically, you said it doesn’t look like this company is on the rocks. What does it look like?

ALLYN: Yeah, it looks like they really want to focus on two things – AI and video games. The AI tools that have been taking the internet by storm, you know, ChatGPT and this image generator, DALL-E, well, those tools were developed by a firm called OpenAI in Silicon Valley, and Microsoft is one of its biggest investors. And Microsoft is talking now about how this AI can be used in more of its products. And they’re really focusing on that. Another big bet, though, is video games. Microsoft already has a sizable video game business with Xbox, but it’s now trying to acquire video game giant Activision Blizzard. That is now being challenged by federal regulators. But whatever happens there, Microsoft sees video gaming as a major part of its future.

SHAPIRO: I mentioned fears of a recession. Does the tech industry slowdown tell us anything more broadly about the economy as a whole?

ALLYN: Yeah, that is the question right now. Look, there are some experts who say the tech industry’s pullback is specific to Silicon Valley, but the tech world is seen as an economic bellwether, right? I mean, it’s a huge employer. It’s a multitrillion-dollar industry. These companies are on the cutting edge. And as we know, they intersect with just about every other part of the economy. So, you know, it’s just hard to imagine a tech downturn not having some broader sweeping effects here. But if it does, we’ll be following it, Ari.

SHAPIRO: NPR’s Bobby Allyn, thanks for your reporting.

ALLYN: Thank you.

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