Big Tech Layoffs Are Big News, But Not For The Labor Market As A Whole, According To New Data

Recently, tech businesses have announced enormous and unprecedented rounds of layoffs, sometimes numbering in the tens of thousands. Here is the most recent:

About half of Twitter's staff have been let go since Elon Musk became CEO.

Jack Dorsey, the founder of Twitter, accepted some of the blame for the company's overexpansion during tough financial circumstances.

Similar sentiments were expressed by Mark Zuckerberg, CEO of Meta (NASDAQ: META), in a letter announcing the dismissal of 11,000 workers, or 13% of the company's global workforce.

Lyft (NASDAQ: LYFT) made the decision to cut 13% of its workforce earlier this month.

Stripe, a leader in digital payments, reduced its personnel by 14%.

1,300 out of the 6,400 workers at Snapchat (NYSE: SNAP) were let go in August.

10% of Shopify's employees were let go in July.

Over 10,000 staff members are anticipated to be let go by Amazon (NASDAQ: AMZN) (it froze new hires at least until 2023)

According to reports, Apple (NASDAQ: AAPL) has also stopped hiring.

These are just a few illustrations of a tendency that extends far beyond the biggest brands in technology. Layoffs. Since the start of the pandemic, fiy, a website that tracks layoffs in the IT sector, has recorded 136,989 layoffs from 849 different companies in 2022 alone.

In spite of the fact that the media and the general public have made this a major narrative for the second half of 2022, actual data reveals that the problem is sector-specific and the U.S. labour market is still robust.

Are Layoffs In The Tech Industry A Sign Of A Poor Economy?

Any room you enter will probably have at least one person utilising one of the services provided by Meta Platform, which includes Facebook, Instagram, and Whatsapp.

Companies like Peloton (NASDAQ: PTON), Salesforce (NYSE: CRM), Robinhood (NASDAQ: HOOD), and Netflix (NASDAQ: NFLX) are influencing the zeitgeist of the decade and have also been involved in the most recent fires.

User interaction and traffic, which in many cases offer better incentives for content creation than precisely reflecting real-world events, dominate the media landscape today.

According to data from the Bloomberg terminal, this explains in part why the second week of November broke the record for being the week in which the subject of layoffs was discussed the most over the whole decade.

But in the big picture, the 164 million-person American labour force won't even make up 0.1% of all the huge tech layoffs in 2022.

According to the most recent Department of Labor statistics on jobless claims, 4,000 fewer people registered as unemployed each week in the second week of November, bringing the total number of claims to 222,000.

Jan Hatzius, the chief economist of Goldman Sachs (NYSE: GS), stated in a research that "tech layoffs are not a warning of an oncoming recession."

Even while the internet industry has billions of users, according to figures from Goldman Sachs, it only employs a minuscule portion of the total American labour. The unemployment rate would only increase by less than 0.3% even if every employee in internet publishing, broadcasting, and web search were dismissed simultaneously.

The U.S. economy, the tech industry, and the job market

Actually, there are still a lot more tech job vacancies than there were before the pandemic.

While many tech companies cut back on staff, others are actively hiring. According to the most recent Jobs Report from CompTIA, despite the layoffs, tech companies added more than 20,000 new jobs in October 2022, marking the 23rd consecutive month of growth in hiring.

A total of 317,000 job postings were posted in October, 10,000 more than in September. According to Goldman Sachs' Hatzius, this means that laid-off computer professionals should have a fair chance of finding new employment.

The tech job market is still strong, despite the fact that big corporations have stopped down projects and concentrated on hard revenue in response to this year's decline in share prices.

Tech businesses expanded by making acquisitions, developing new experimental initiatives, and adding staff as stock prices surged to previously unheard-of heights and low interest rates made it easier for significant institutional investment.

However, the sector was forced to contract as a result of rising borrowing costs and falling tech company stock prices, which in some cases underperformed the S&P 500 by tens of percentage points. As a result, the majority of companies decreased their headcount in order to concentrate on the revenue-generating side of their operations.

Hatzius claims that while large layoffs have occurred in the past in the tech industry, they have not occurred generally across the American labour market.

The Overall Job Market: The level of unemployment is not just another macroeconomic indicator. The National Bureau of Economic Research is assessing which boxes still need to be checked in order to declare a full-fledged recession after months of skyrocketing inflation and two straight quarters of GDP drop.

A solid employment market continues to be one of the few factors that will prevent the economic slump of 2022, despite the fact that October's inflation moderated a little and the third quarter showed growth once more.

3.7% is still a very low unemployment rate, and there are no signs that it is going up.

job search firms According to Glassdoor and Indeed, the shortage of labour will last for a while, and businesses will continue to have trouble filling hiring gaps left by the COVID-19 pandemic.

As central banks seek to reduce inflation, the paper states that "the economy of many countries could weaken or perhaps enter a recession. The availability of labour, however, appears likely to remain constrained in the long run, even if businesses' recruiting appetites decline.

In the majority of industrialised nations, where the population is ageing, a limited labour supply is a result of demographic trends. According to the paper, allowing more immigration can assist in resolving these issues because "attracting people from outside is an efficient strategy to increase employment in tight labour markets."