Microsoft Cuts Another 9,000 Employees

Heads are rolling at Microsoft at levels that would put Robespierre to shame.

The Washington-based tech giant confirmed Wednesday that it was laying off more than 9,000 employees in yet another round of cuts amid the tech sector’s multi-year effort to reduce headcounts.

Tweaked Code

Microsoft said cuts would affect multiple divisions, geographies, and roles, as first reported by the Seattle Times. Microsoft Gaming is included in this round’s culling; it is not yet clear what teams in the company will take the biggest hit.

The Verge on Wednesday republished an internal memo that Xbox chief Phil Spencer sent to employees, saying that the Gaming team will “end or decrease work in certain areas of the business and follow Microsoft’s lead in removing layers of management to increase agility and effectiveness.”

This month’s round of layoffs eclipses termination notices handed out to some 6,500 Microsoft employees in May and June, though it’s smaller than its 10,000-employee reduction in 2023.

AI and hiring binges during the pandemic have been cited as the driving force behind the pace of layoffs in the tech sector, but a small provision tucked into the 2017 Tax Cuts and Jobs Act (TCJA) may also have had a hand in the tech sector’s en masse move to reduce its workforce, according to Quartz. Blame it on the tax code:

• To offset the revenue impact of the corporate tax cuts rolled out during President Trump’s first term, lawmakers tweaked Internal Revenue Code Section 174, a nearly 70-year-old provision that allowed businesses to deduct research and experimental expenses in the year they were incurred.
• Deductible expenses included materials and supplies, patents, operational facilities and wages paid to employees (full-time, part-time or under contract) engaged in or supervising qualified research. Businesses were required to spread out those deductions over several years when the revised tax code took effect in 2022, likely altering cash flow plans substantially.

Perhaps it isn’t a coincidence that layoffs in the tech sector started to accelerate in the second quarter of 2022 after a brief surge in the early part of the pandemic. Cullings peaked in the first quarter of 2023, when 167,574 people were laid off, according to Layoffs.fyi, an independent firm tracking job losses. So far this year, 63,823 tech employees have been laid off, not counting Microsoft’s latest news.

A Key Indicator: Thursday’s June jobs report will be one of the last labor market signals taken into consideration before the Federal Open Market Committee’s July meeting to determine at what level interest rates should be set. Even if headline figures blow past economists’ estimates for 110,000 jobs added, proof of weakness may come later — the Labor Department has been revising monthly employment figures downward for January through April. An immediate cut to rates looks unlikely anyway, with traders placing odds of a 25-basis-point cut at 23.3%, according to CME FedWatch.