Apple is the latest tech firm to cut staff. What do the layoffs tell us about the economy?

In some cases, it’s about responding to competition. In others, it’s a way of bracing for a possible economic downturn.

Apple recently laid off about 100 contract workers in its recruiting division, according to a recent report by Bloomberg News. It’s the latest sign that the tech sector is hitting the brakes on new hires. Facebook’s parent company, Meta, along with Amazon (which is a Marketplace underwriter), Alphabet, Microsoft and several others have made similar announcements this year.

Up until this year, tech companies had been doing a lot of hiring. That’s in part because the pandemic created a lot of demand for their products and services.

“During the pandemic, the strong got stronger in tech,” said Dan Ives, managing director at Wedbush Securities. “From an e-commerce [perspective], everyone’s sitting at home streaming, to software, to cloud.”

But that’s started to change, depending on the type of tech company we’re talking about, said J.P. Gownder at Forrester Research.

“There are companies that legitimately have performance problems, there are companies that are simply being a little bit cautious and slowing things down.”

Netflix, for instance, is grappling with new competition, Gownder said; it laid off about 450 employees. Other companies are worried about where the economy’s headed, so they’re slowing down hiring.

“In an environment of economic uncertainty, even big companies will say, ‘Hey, let’s wind down this particular part of our business because it’s not successful, and we expect it to be even less successful if the economy slows,'” Gownder said.

Tech companies might also be expecting other businesses to slow down their spending. In other words: advertising revenue, said Carolina Milanesi, a tech analyst with Creative Strategies.

“Any social media platform or content platform, advertising is usually one of the things that companies kinda pull back on,” she said.

After the hiring boom in tech over the last few years, Milanese said we should expect that pace to slow down.