Widening tech, biotech job cuts could jolt broader Bay Area economy: experts

While most of the attention has fallen on Twitter, a growing number of Bay Area tech and biotech companies are revealing plans to chop what amounts to thousands of jobs, worrying observers who fear the layoffs might haunt the region’s broader economy.

Facebook app owner Meta Platforms is the latest firm that’s thought to be mulling massive job cuts in the wake of revenue losses and a huge plunge in its stock valuation in recent months. A Wall Street Journal report Friday said that the company could begin notifying workers of its plans by the middle of this week.

Among other high-profile tech and biotech companies cutting jobs are Twitter; Cepheid; Oracle; Lyft; Stripe; Astreya, which provides tech services to Facebook; Zymergen; and BioMarin Pharmaceutical. Taken together, the reductions could put well over 3,000 Bay Area residents out of work.

“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, said he believes at least some of the recent tech layoffs are the result of circumstances that are particular to each respective tech or biotech company. That is certainly the case with Twitter, recently taken over by Tesla CEO Elon Musk, who announced Friday the company has been losing more than $4 million per day, in part because advertisers are waiting to see how he redefines the social platform.

“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.”

Any tech losses will have spillover effects locally: Numerous Bay Area restaurants, retail shops, hotels and other tech companies depend on high-profile tech firms to 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, one of the first steps announced by new owner Musk, who on Friday eliminated about half of the company’s estimated 7,500-member worldwide work force.
• 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.
• Astreya, which provides technology and software services under a contract with Facebook app owner Meta Platforms, has decided to chop 144 positions in Newark.
• 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 fewer people 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 said they 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.”