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  • Writer's pictureCrest Economics

Worldwide job cuts- February 2023

Upon the onset of the COVID-19 pandemic, tech firms were overwhelmed with an influx in demand. This led to a pandemic-related hiring boom as companies increased their workforce to meet rising consumer demands. However, a shift in digital spending habits alongside a worsening global economic outlook has led to a contraction in demand for software and tech services. Accordingly, tech firms have become inclined to reduce their workforce.

The US has seen a string of layoffs as inflation continues to exceed its forecast, reaching 6.4% in January. The multinational e-commerce business, Amazon is one of the main contributors to this job purge sweeping US tech firms. Plans to axe more than 18,000 employees, the largest set of layoffs in the company’s history, have been put in place. Andy Jassy, CEO of Amazon, announced these cuts to staff in November 2022 amidst what they called an “uncertain macroeconomic environment”, wherein the business has been confronted with slowing sales and rising expenses.

Persistent inflation within the US economy has also forced investors to back off bets about the Federal Reserve cutting interest rates. This comes about as the Fed lifted its main policy rate by 0.25 percentage points in February. As such, consumers have been hit with a dose of reality as Mr Nadella, CEO of Microsoft, observed that customers were optimising, “their digital to do more with less”, following accelerated spending during the pandemic. Following this, the company confirmed that it will be cutting 10,000 jobs worldwide to match this downward trend in revenues.

Although most of the layoffs impacted employees in the US, the new year brought grim news for Australians as the RBA continued to hike the cash rate, with the rate recently increasing from 3.10% to 3.35%. Rising interest rates have especially hurt cash-burning start-ups as investors become more cautious about making speculative bets. Milkrun, a grocery delivery service, is beginning to falter as the company has reported various failed attempts at partnering with major competitors like Uber and Coles, as well as major losses in order volumes. Accordingly, the company has told staff it will cut 20% of its workforce. All axed staff have been assured they will receive legal entitlements, counselling and a bonus to assist them through redundancy and these harsh economic conditions.

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