SAN JOSE, Calif. — Bay Area tech and biotech companies have recently revealed plans to chop thousands of jobs, layoffs that raise the specter that these cutbacks might haunt the region’s broader economy.
Facebook app owner Meta Platforms is the latest Bay Area tech company that’s thought to be mulling massive job cuts, representing a grim follow-up to the staffing reductions already being undertaken by several other tech or biotech companies in the nine-county region.
Among the high-profile tech and biotech companies cutting jobs: Twitter; Facebook’s owner; Cepheid; Oracle; Lyft; Stripe; Astreya, which profits tech services to Facebook; Zymergen; and BioMarin Pharmaceutical.
The impacts, already wrenching for the individual workers affected in the Bay Area and elsewhere, could spill over into the region’s economy generally, some experts warn.
“Tech is one of the engines of the Bay Area economy,” said Patrick Kallerman, vice president of research for the Bay Area Council Economic Institute. “If something were to really go south in tech, it would have cascading effects in the rest of the economy.”
Kallerman, however, believes the tech layoffs that have erupted in recent days and weeks, as well as those on the horizon, could be the result of circumstances that are particular to each respective tech or biotech company.
“I don’t see anything systemic happening yet,” Kallerman said. “At the moment, this appears to be individual company circumstances. But it’s possible other organizations may view the current tech layoffs as an opportunity to pare back and become leaner in the face of a possible upcoming recession.”
Numerous Bay Area restaurants, retail shops, hotels and other tech companies depend on larger or high-profile tech companies to help bolster their own sales and profits.
“The tech sector is very important to the Bay Area economy,” said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. “These layoffs are real. I think the job cuts are largely the result of a slowdown in the economy and the possibility of an upcoming recession as well.”
Among the confirmed and potential layoffs among tech and biotech companies in the Bay Area:
— Facebook’s Menlo Park-based owner is eyeing the elimination of thousands of worldwide jobs, with an unknown impact in the Bay Area being considered by the social media titan.
— Stripe, a San Francisco-based online payments giant, is planning to eliminate about 1,000 jobs, representing 14% of its workforce.
— Cepheid, a medical devices and biotech firm based in Sunnyvale, eliminated roughly 1,000 jobs in the Bay Area. The largest impact occurred at the company’s Newark factory, where 746 positions were lost.
— Twitter cut about 900 jobs in the Bay Area, including about 800 in San Francisco at its headquarters and 100 in San Jose.
— San Francisco-based ride-hailing firm Lyft is planning to cut about 700 jobs, which works out to roughly 13% of its workforce.
— Texas-based Oracle has chopped 200 jobs, primarily affecting employees in Redwood City and Belmont.
— Zymergen, an Emeryville-based biotech firm, has decided to cut 110 jobs in its East Bay hometown.
— Kittyhawk Corp. is cutting 100 jobs in two Bay Area cities: Mountain View and Palo Alto. The Silicon Valley company had been developing a flying car that could take off vertically and had the backing of Google co-founder Larry Page.
— BioMarin Pharmaceutical has decided to cut 94 jobs in the North Bay, affecting workers in San Rafael and Novato.
— WeDriveU Inc. is cutting 97 positions in the Bay Area, affecting employees in Menlo Park and Newark. The Burlingame-based company provides employee shuttles to major Bay Area employers such as tech companies.
— onsemi, a semiconductor manufacturer, is cutting 88 jobs, all in San Jose, due to a shutdown of a site in the Bay Area’s largest city.
The problems in tech may have erupted partly because venture capitalists went overboard in a funding spree for an array of up-and-coming tech and biotech companies, said Christopher Thornberg, founding economist with Beacon Economics.
“In 2021, you had a record amount of venture capital spending that was double the record amount of venture capital in 2020,” Thornberg said. “You have an excessive amount of stimulus money and now that stimulus is going away. So the companies that were depending on getting stupid money can no longer get that stupid money. Gravity still exists.”
Plus, the spending on tech-created services and products during the first year or two of the coronavirus outbreak has begun to dwindle as people no longer are forced — or inclined — to work from home or shelter in their residences.
“Tech had a bonanza during the pandemic,” said Russell Hancock, president of Joint Venture Silicon Valley, a San Jose-based think tank. “Everybody on the planet had to buy equipment, devices, streaming capabilities, platforms, and phones. Now, all of the purchasing has taken place. Things are returning to normal.”
One bright spot amid the dark landscape of the job cuts: Tech workers who have lost, or are losing their jobs, may find that they can hop to another employer in short order.
“Tech workers who are laid off have transferable skills,” said Michael Bernick, an employment attorney with law firm Duane Morris and a former director with the state Employment Development Department. “There are multiple tech employers that are still hiring.”
Despite the encouraging elements in the current forbidding scenarios arising in the tech sector, experts believe the Bay Area economy generally is headed for a significant slump in its employment sector.
Even so, the fundamentals for future growth remain in place despite the likely prospects for short-term pain.
“There’s no question the layoffs mean that job growth will slow and possibly turn negative,” Levy said. “Some real pain could occur here, but that doesn’t affect the long-term outlook for the Bay Area.”
