Amid July’s surprisingly robust jobs report, the popular internet search term “tech layoffs 2022” presents a sharp contrast to the underlying enthusiasm. Yes, from a broader perspective, employment may be rising. However, a large chunk of the higher-paying opportunities — particularly in the technology sphere — have considerably faded.
While the narrative might not make sense initially, investors must realize the jobs report features many nuances. For instance, the U.S. Bureau of Labor Statistics also produces the labor force participation rate disclosure. Moreover, for the key ages of the 25 to 54 years demographic, the participation rate has conspicuously failed to meet pre-pandemic levels. Thus, tech layoffs in 2022 don’t necessarily contradict the positive implications of the national employment reading.
As well, internet and computing innovation giant Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) perhaps provided the biggest concerns regarding tech layoffs in 2022. Apparently, senior executives warned Google employees that if productivity doesn’t improve, “blood on the streets” will commence. If the economy was truly improving, someone forget to tell Alphabet.
Of course, the malaise doesn’t just impact any one company. Crunchbase provides an ongoing list of companies participating in tech layoffs in 2022. Here are some of the notable publicly traded examples.
Easily one of the icons of the post-coronavirus pandemic new normal, trading app Robinhood (NASDAQ:HOOD) epitomizes the crisis’ giveth-and-taketh-away effect. When companies panicked and sent their workers online, many folks found extra time on their hands. Indeed, the Wall Street Journal remarked that suddenly, everybody became a day trader.
Today? Trading sentiment just isn’t what it used to be. From geopolitics (i.e. Russia’s invasion of Ukraine) to monetary policy, the backdrop of rising inflation, supply chain disruptions, and overall uncertainties plague the equities sector. For all the talk about holding on for dear life (HODL-ing), even the previously committed retail traders hit the exits.
According to data from Crunchbase, Robinhood laid off about 300 people in April this year. In August, the company handed pink slips to 713 employees. Overall, the trading app service cut 30% of its workforce, representing one of the glaring names among tech layoffs so far in 2022.
As one of the world’s most popular cryptocurrency exchange and trading platforms, Coinbase (NASDAQ:COIN) enjoyed significant hype last year. In April of 2021, the company launched its initial public offering, essentially facilitating another mechanism to buy cryptos.
In a way, Coinbase presented a means to sell tickets to the game instead of wagering on the over/under. True, you can theoretically make far greater gains with individual winners among virtual currencies. However, COIN stock operated somewhat like an infrastructural play. If you believed in the concept of cryptos without wanting to take a stab at any one asset (among 20K-plus offerings), Coinbase was your friend.
Unfortunately, the crypto sector melted down and with it, took down COIN stock. To be fair, recent positive rumblings in the space have taken COIN up 54% in the trailing month since the close of Aug. 16. Nevertheless, on a year-to-date basis, shares hemorrhaged 64%.
Adding insult to injury, Coinbase ranks among the most conspicuous names of tech layoffs in 2022. Per CBS News, the company plans to pink slip 1,100 employees, or 18% of its workforce.
At a certain point in consumer economic history, the business model of Groupon (NASDAQ:GRPN) made sense. Essentially, Groupon facilitated extra sales volume for its clients’ enterprises. In exchange, said enterprises offered discounts for those customers participating in the incentivization programs. It took the textbook concept of economies of scale and extracted fun out of it.
Unfortunately, as companies established direct relationships with their customers via social media platforms, Groupon became less relevant. And that’s putting it nicely. True, GRPN stock may be up nearly 32% in the trailing month, likely a beneficiary of speculative fervor. That doesn’t take away from the fact that the security is down 50% for the year.
What’s more, over the past five years, GRPN plunged 83%. If that wasn’t ugly enough, Google Finance shows that its lifetime return is a loss of 97.4%.
Not surprisingly, Groupon ranks near the top for tech layoffs in 2022. According to a TechCrunch report, the company laid off more than 500 employees or 15% of its workforce.
Typically, a personal vehicle represents a household’s second-most expensive purchase. Therefore, it pays to try to minimize the costs involved. Indeed, buying used — even though it carries an outdated perception among consumers – offers an ideal mechanism to save money. Recently, companies like Vroom (NASDAQ:VRM) entered the space to marry the convenience of e-commerce with used-car acquisitions.
On paper, it sounds like a great business plan. Fundamentally, during the worst of the Covid-19 pandemic, many people preferred car delivery services. Vroom offered a largely contactless way for customers to get into their own ride. Again, during the initial months of the pandemic, Vroom enjoyed a highly motivated consumer base.
However, with the blistering inflation rate cutting into the dollar’s purchasing power, customers eschewed the premiums associated with online deliveries. Basically, people can always trade down from Vroom’s convenience-oriented service to less convenient but cheaper alternatives.
Worsening matters, Vroom counts within the ranks of tech layoffs in 2022. Automotive News reported that Vroom will cut 337 positions.
Easily one of the most counterintuitive developments of the pandemic came from the housing market. Fears of an apocalyptic meltdown quickly blossomed into a housing boom. Though lower benchmark interest rates helped many homebuyers, the main risk stemmed from a potential economic crisis. The interest rate can be half-a-percent for all I care. If you lose your job, a mortgage can quickly become a financial straightjacket.
While the housing sector melted up throughout 2021, tech-driven brokerage firm Compass (NYSE:COMP) suffered the opposite fate. Since its IPO last year, COMP stock never quite gained traction. Per Google Finance, the lifetime return of COMP is a loss of 79%.
Now, the company has another new listing: A dubious participant within tech layoffs 2022. In June of this year, Bloomberg reported that Compass will lay off about 10% of its workforce. Adding to the woes for COMP stock, the underlying company also mentioned that it will slash tech-driven initiatives, killing incentives for agents.
A winner of the new normal, during the spring doldrums of 2020, Shopify (NYSE:SHOP) shares had floundered around an average of $35. However, as Americans acclimated to the Covid-19 crisis, SHOP veritably soared. Essentially, Shopify enjoyed a hostage audience. With government mandates forcing people into their homes, shopping online represented a necessary distraction.
At its peak in November of last year, SHOP stock inched its way toward the $200 level. It didn’t quite get there. And since that period, Shopify has been a sad shell of its former self. While SHOP did gain nearly 22% in the trailing month, it’s nevertheless down a staggering 71% YTD.
A few weeks ago, Shopify made the inevitable statement: It would lay off about 1,000 workers or 10% of its global workforce. According to the Wall Street Journal, “Rising interest rates, supply-chain shortages and the reversal of pandemic trends, including remote work and e-commerce shopping, have cooled what was once a red-hot tech sector.”
Another public entity representing the capricious nature of Covid-19, video game platform Skillz (NYSE:SKLZ) blossomed during the new normal’s restrictions. Again, with governments ordering people to shelter in place, along with many non-essential businesses shut down, entertainment options lagged considerably. With nothing better to do, many folks turned to digital entertainment to wile away the hours.
However, this unique consumer pivot didn’t last. Today, even with skyrocketing consumer prices, people will take time to go on vacation. Called revenge travel, pent-up demand from experiences that Covid denied inspired people to leave the house. As well, government authorities relaxing their Covid protocols meant people can finally enjoy a true vacation.
Unfortunately, this dynamic translated to fewer incentives to resort to digital entertainment. Not unexpectedly, Skillz became another entry in tech layoffs 2022. According to a TechCrunch report, Skillz laid off 10% of its workforce in May.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.