For months, top tech companies have announced job cuts one after another as the U.S. economy slows and recession fears mount. Despite the bleak headlines in the newspapers, labor economists say the layoffs may not necessarily signal a major recession in other industries.
More than 41,000 workers have been laid off in the tech sector so far this year, according to data compiled by Crunchbase. Late last month, Snap announced it was laying off 20% of its workforce after reporting disappointing second-quarter earnings. Other big companies like Netflix, Microsoft and Shopify have already laid off hundreds of employees this year. Google and Apple have also reportedly decided to freeze or slow down hiring.
Economists and investors are growing wary of a potential downturn in the labor market as the Federal Reserve raises interest rates to cool consumer demand and keep inflation in check. When people spend less on goods and services, prices should go down. But it risks triggering a recession, as businesses may delay hiring or lay off workers in response to falling demand.
Layoffs in the real estate industry, in addition to tech, are in the spotlight amid rising mortgage rates and declining home sales. And his PwC survey in August found that half of the U.S. executives surveyed said they were reducing overall headcount despite concerns about hiring and retaining talent. says that
But despite a troubling wave of layoffs in the tech industry, they may in part be returning to more normal employment levels. During the early stages of the pandemic, many companies ramped up hiring. And the overall labor market still looks resilient. The employer added his 315,000 jobs to the economy in August. This is a solid increase, though he has slowed from July’s big increase. Also, the unemployment rate rose to 3.7% last month, but as more Americans joined the workforce, the unemployment rate rose only slightly from its 3.5% in July, half a century later. It was the lowest level ever.
Additionally, aggregate data shows layoffs are still low (about 1.4 million people were laid off or laid off in July, compared to nearly 2 million in February 2020). New claims for unemployment benefits have also started to decline in recent weeks.
Some labor economists say job cuts in the tech industry have likely been too few so far to have a significant impact on overall employment data. Layoffs may also be underestimated due to delayed government reporting, they say, but overall demand for tech workers remains strong, with layoffs higher than usual in other industries such as hospitality. It is possible that the less is offsetting the loss.
And most of the tech workers who are being laid off don’t seem to have trouble finding other job opportunities because the labor market is tight, economists say.
ZipRecruiter chief economist Julia Pollak said the layoffs clearly signaled a slowdown in the tech industry, but didn’t expect it to be a leading indicator of employment trends in the broader labor market.
“I think the impact on the rest of the economy will be fairly limited,” Pollak said.
Technology executives have expressed concerns about the future of the U.S. economy, but as the economy returns to more normal conditions, tech companies also face their own challenges, she said.
Early in the pandemic, some tech companies “experienced explosive growth” and added jobs, Pollack said. Some of these companies are now beginning to scale back to more sustainable hiring and staffing levels. Some companies are losing money as declining valuations and a stronger dollar hurt profits abroad, forcing them to become more conservative in order to boost profitability. she added.
“The once-in-a-lifetime conditions that fueled their growth have now kind of evaporated,” Pollack said. It may be less dependent on Peloton.”
Tech jobs still in high demand
Demand for workers remains high, economists say, even with some layoffs in the technology sector. Pollack said he’s heard from recruiting teams at some companies that they’re deliberately looking for workers who have been laid off because they “want to get talent quickly.”
Employment remains strong. The tech industry has added 175,700 jobs so far this year, according to data from his CompTIA, an information technology trade association. This is his 46% increase from a year ago. However, the total number of technical job vacancies is starting to decline.
Glassdoor chief economist Daniel Zhao said many furloughed workers in the tech sector have bounced back and are finding new jobs easier. Total job openings in July he reached 11.2 million, according to Labor Department data. By comparison, there were approximately 7 million job openings in February 2020.
Zhao said based on anecdotal information, it doesn’t appear that the majority of tech companies are laying off workers or delaying hiring, but the lack of data makes it difficult to judge. But with the broader economy slowing and the risk of a recession looming, most tech companies appear to be reassessing their hiring plans, he said.
And while the slowdown in tech jobs may not yet signal dramatic changes in the broader labor market, it means that their influence over employers is waning, so It’s still not a good thing, said Zhao. This may mean, for example, that workers have to accept job opportunities with pay cuts or fewer benefits.
“Even if laid-off workers are able to find work fairly quickly, it means they are very stressed and less empowered to actually go find the right job for them. It’s the right use of their skills,” said Zhao.
