Amazon HQ2 was supposed to add jobs last year. It shed them instead.

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Amazon has fallen so far behind schedule in creating new jobs at its Northern Virginia headquarters that its workforce at those offices shrank last year, the company confirmed, showing how the project that it had pitched as an economic jolt is instead hitting a slowdown.

Following a much-hyped sweepstakes across North America, the tech giant in 2018 made a deal with Virginia officials to locate half of its second headquarters in Arlington, just outside D.C.: In exchange for as much as $750 million in taxpayer subsidies from the commonwealth, it agreed to build a massive new campus near the Pentagon and fill it with tens of thousands of new employees.

The company was expected to gradually add 25,000 new jobs at HQ2 by the end of the decade, according to its agreement with Virginia, and receive money from the commonwealth as it hit annual hiring targets — such as 2,665 new jobs last year.

Instead, Amazon lost hundreds of existing positions in Arlington in 2023 — a sharp turnaround that executives attributed to layoffs and a hiring slump across the company. (Amazon founder Jeff Bezos owns The Washington Post.)

“Last year we made the tough decision to eliminate a small percentage of corporate roles and to slow hiring around the globe, which impacted our forecast growth in HQ2,” Holly Sullivan, the company’s vice president of worldwide economic development, said in a statement.

Sullivan said Amazon has not abandoned its target of 25,000 jobs, though a company spokesperson later clarified that it would look to meet that goal by 2038. She called HQ2 “a long-term investment” and noted that there are 1,000 open positions for the campus, where two soaring office towers opened last year, part of a $2 billion total investment in Virginia.

But amid a shift in work habits prompted by the coronavirus pandemic and a squeeze in the tech industry, the hiring downturn marks another setback in the boost Amazon had initially promised to Arlington. The rise of remote and hybrid work has challenged tech industry job centers, including the growing “innovation district” officials have tried to build around HQ2.

“The tech industry is no longer booming nonstop, and the idea you’re going to have people in the office to help a location looks less appealing than it did before,” said Nathan Jensen, a professor at the University of Texas at Austin who studies economic development. “In the end, it may be a project that’s nowhere close to what it was hoped be.”

Amazon employees are now required to commute to the office at least three days a week, but the HQ2 buildings that the company opened last year in the Crystal City neighborhood have room for 14,000 employees — about twice as many as currently work there. The company has for more than a year paused construction on three other office towers and the futuristic “Helix” that are supposed to be built up the street, even as its contractor began installing utilities last month.

Jensen said that in some sense, it was emblematic of broader shifts in corporate tech. While the Amazon that pitted cities against each other for a flashy economic development prize was known for constantly opening new lines of business, the one that actually built HQ2 just shuttered an Amazon Fresh grocery store a few blocks away.

“If they had proposed this in the first place, would they have gotten any special attention?” Jensen asked. “There was just a little bit of hubris there.”

Amazon continues to grapple with economic headwinds following the pandemic, despite record-high stock performance. The company laid off more than 27,000 employees between 2022 and 2024, though layoffs didn’t affect enough HQ2 employees at once to trigger notices under the Worker Adjustment and Retraining Notification Act in Virginia. Chief executive Andy Jassy said in a letter to shareholders last week that he expects the company to cut more costs as it looks to become more efficient.

The drop-off in hiring in Arlington will probably affect how much money Amazon will receive from Virginia. To qualify for those subsidies, Amazon must submit a document to the commonwealth every spring detailing its total hiring progress at HQ2 since 2019.

A comparison of reports from last year and this year show that Amazon lost hundreds of jobs in 2023: The company’s application last April said it employed 6,939 people in qualifying roles at HQ2, compared with 6,644 positions this year.

Not all jobs in Arlington necessarily qualify for state subsidies, which are subject to specific criteria, but the drop is true even for all positions at HQ2. Amazon said in last year’s application that it employed 8,430 people in total in Arlington, a figure that fell to 7,791 employees in this year’s report.

State officials in 2018 had agreed to pay the company $22,000 for each qualifying full-time job at HQ2 with an average salary of $150,000. (That salary is supposed to climb slightly each year.) But Virginia’s incentives for Amazon are also structured to ensure that the company maintains new jobs for at least five years.

Amazon’s application last year asked the state for nearly $153 million in taxpayer subsidies to be paid by late 2026. The hiring slump reflected in this year’s report probably means Virginia’s payout could drop by several million dollars if job numbers do not pick back up beyond 2022 levels.

Christian Martinez, a spokesman for Gov. Glenn Youngkin (R), deferred comment to the Virginia Economic Development Partnership, which reviews the company’s applications for incentives. A spokeswoman for that agency did not respond to a request for comment.

Timothy J. Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Michigan, said the shifting payout points to the success of the “unusual approach” that Virginia took in structuring its incentives for Amazon HQ2. The net benefits of the project may be smaller, but the costs for state government will be, too, he wrote in an email.

Because the company submitted a “progress report” instead of a formal application this year, Virginia will also not pay Amazon any incentives in 2027. The company had also declined to apply for incentives from the commonwealth until 2021, citing pandemic-related challenges, even though it had consistently been ahead of schedule on hiring at HQ2 before last year.

This year’s report marks the first time that Amazon has fallen behind on its hiring goals in Arlington.

In addition to the money from Virginia, the incentives package designed to woo Amazon there also included up to $23 million in taxpayer subsidies from Arlington County. None of those incentives have been paid out yet.

Amazon’s deal with Arlington was negotiated with the expectation that having such a large company in town would help fill up hotel rooms: The county promised to give the tech giant a 15 percent cut of any increase in its local hotel tax. That revenue stream, however, had not yet fully recovered from the pandemic as of last fall.

But Arlington County Board Chair Libby Garvey (D) said the hiring slowdown was not cause for concern — it was to be expected.

“Arlington’s businesses — like most of the nation’s — have seen the lasting impact of the pandemic on workplace trends,” she said in an interview. “Amazon is no different. We’re actually thrilled with the company’s progress.”

Dozens of new street-level retailers have opened at the HQ2 office towers that opened last year. Garvey said the area “is so vibrant, so alive, and that’s because of Amazon’s presence.”

Caroline O’Donovan in San Francisco contributed to this report.

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