Tech companies have been announcing massive and unprecedented waves of layoffs lately — sometimes numbering in the thousands. Here’s the latest:
These are just a few examples of a trend that’s reaching far beyond the most famous names in tech. lay offA site tracking layoffs in the tech industry since the start of the pandemic has recorded 136,989 layoffs from 849 companies in 2022 alone.
Indeed, the press and public opinion made this topic a central narrative for the second half of 2022, but hard data suggests the issue is sector-specific, and the US job market remains strong.
…Are tech layoffs a sign of a bad economy?
Walk into any room, and at least one person is likely to be using a product from Meta’s suite of platforms, which includes Facebook, Instagram and WhatsApp.
peloton pton, sales force crm, Robin Hood hood And netflix nflx These are all companies that are shaping the zeitgeist of the decade and have also been part of the latest round of fire.
The current media landscape is dominated by user engagement and traffic, which in many cases provides a better incentive to create content than accurately reflect real-world events.
That’s partly why the second week of November broke the record for being the week in which the topic of layoffs was covered the most in an entire decade, according to data from Bloomberg Terminal.
Yet in the grand scheme of things, all of 2022’s big tech layoffs don’t even make up 0.1% of the total US workforce of 164 million.
data from latest Labour Department The report on jobless claims showed that the number of people registering as jobless decreased by 4,000 people on a weekly basis in the second week of November to total 222,000 claims.
according to a report by Goldman Sachs GS chief economist jan hetzius“Tech layoffs are not a sign of an impending recession.”
According to data from Goldman Sachs, even though the tech sector reaches billions of users, it accounts for only a tiny fraction of the entire US workforce. Even if all workers in Internet publishing, broadcasting, and web search were fired together, the unemployment rate would increase by less than 0.3%.
The job market, the tech sector and the US economy
Tech job openings are actually well above their pre-pandemic levels.
While many companies in tech have reduced their workforce, others are still hiring. ComptiaThe latest Jobs report shows that, despite layoffs, tech companies hired for the 23rd consecutive month in October 2022, adding more than 20,000 positions.
“Job postings also increased by 10,000 in October compared to September, for a total of 317,000 job openings, so laid-off tech workers should have a good chance of finding new jobs,” says Goldman Sachs’ Hetzius.
While tech companies have responded to this year’s decline in share prices by shelving projects and focusing on hard revenue, the tech job market is proving strong.
As stock prices soared to unprecedented levels and low interest rates facilitated large institutional investment, tech companies expanded by making acquisitions, building new experimental projects, and hiring new teams.
But with borrowing costs rising and stock prices falling for tech companies (underperforming the S&P 500 in some cases by less than ten percentage points), the sector was forced to contract and most companies laid off their employees. reduced the number. In favor of the business of making money.
According to Hatzius, history shows other incidents of mass firings in the tech sector that are not related to mass firings in the US job market as a whole.
The Job Market at-Large: Unemployment is not just another macroeconomic measure. After months of rising inflation and two consecutive quarters of GDP decline, National Bureau of Economic Research It’s looking at which boxes still need to be ticked to declare a full recession.
While October’s inflation eased slightly and growth rebounded in the third quarter, the marco-economic outlook is still rough, and a strong job market is one of the few measures that make the 2022 economic downturn an odd duck out of .
Unemployment remains at a relatively low rate of 3.7% and shows no signs of worsening.
Job search companies Glassdoor and Indeed predict that the labor supply will remain low for the long term, and that the recruiting difficulties experienced by companies following the COVID-19 pandemic will remain constant.
According to the report: “Many countries’ economies could slow or slip into recession as central banks work to tame inflation. But even if employers’ appetite to hire dwindles, workers’ Supplies are likely to remain tight for a long time.”
The tight labor supply follows demographic trends in most industrialized countries, which present an aging population. Opening up migration, the report says, can help address these difficulties because “attracting workers from abroad is an effective way to boost recruitment in tight labor markets.”