What tech layoffs could mean for the economy

For months, top tech companies have announced the aftermath of a round of layoffs as the US economy slows and fears of a recession mount. Although the headlines sound depressing, labor economists say the layoffs may not signal a major slowdown in other industries.

So far this year, more than 41,000 employees have been laid off in the tech sector. According to data compiled by Crunchbase, At the end of last month, Snap said it would lay off 20 percent of employees after disappointing report by the company revenue for the second quarter. Other large companies – including Netflix, MicrosoftAnd Shopify – Have already laid off hundreds of employees this year. Google And Apple It has reportedly also decided to stop or slow down the hiring.

Economists and investors have become wary of a possible slowdown in the labor market because Federal Reserve raises interest rates to cool consumer demand and control inflation. Since people spend less on goods and services, the idea is that prices should fall. But that risks triggering a recession, as businesses may slow hiring or layoff workers in response to a drop in demand.

Along with the technical sector, layoffs in real estate Industry made headlines Mortgage rates rise and home sales fall, And according to an August PwC survey, half of US officials surveyed said they were reducing the total workforce They even worried about hiring and retaining talent.

But despite the troubling wave of layoffs in the tech industry, they may return to some degree of normal hiring levels. many companies speed up recruitment More people started working from home or hosting events online as the pandemic first began. And the overall labor market still looks resilient. employers 315,000 jobs added to economy in August, the slowdown from July’s big growth but a solid gain. and even though The unemployment rate rose to 3.7 percent Last month, more Americans joined the labor force, and the rate was just up from 3.5 percent in July, a half-century low.

On top of that, the aggregate data shows that layoffs still low (About 1.4 million people were laid off or laid off in July, compared to about 2 million in February 2020.) There have also been new applications for unemployment benefits started falling in recent weeks,

Some labor economists say layoffs in the tech industry have so far been very unlikely, which has had a major impact on overall employment data. And although they say a reduction in government reporting could reduce layoffs, aggregate demand for technical workers remains strong and fewer layoffs than usual in other industries, such as hospitality, could offset the loss.

Economists say most workers in the tech industry who are being laid off are not struggling to find other job opportunities because of the tight labor market.

ZipRecruiter chief economist Julia Pollack said the layoffs clearly signaled a slowdown in the tech industry, but she didn’t expect that to be a leading indicator of hiring trends in the broader labor market.

“I think the consequences for the rest of the economy will be very limited,” Pollock said.

Although tech executives have said they are concerned about the trajectory of the US economy, tech companies have also faced unique challenges as the economy returns to more normal conditions, she said.

Pollack said that earlier in the pandemic, some tech companies “experienced explosive growth” and accelerated hiring. Now, some of those companies are starting to scale back to more permanent recruiting and staffing levels. And as some companies lose money due to falling valuations and a Profits falling abroad due to strengthening of dollarThat said, they have to be more conservative in order to increase profitability.

“The conditions that fostered their growth once in a lifetime have now evaporated,” Pollock said. “People are going back to the gym and going back to the brick-and-mortar store. They may not rely heavily on online shopping apps and Peloton.

Tech workers are still in high demand

Economists said that even though some employees are being laid off in the tech sector, there is still a huge demand for workers. Pollack said he’s heard of recruiting teams at some companies seeking to intentionally lay off workers because they “want to take that talent away immediately.”

Employment remains strong. Tech industry has added 175,700 jobs According to data from information technology business group CompTIA, so far this year has increased by 46 percent compared to a year ago. , total number of However, job postings for technical positions have started to decline.,

Daniel Zhao, a leading economist at Glassdoor, also said that many workers in the tech sector are returning and finding new jobs more easily because there are still so many job opportunities available. In July, the total number of job openings ticked up to 11.2 million, According to Labor Department data, In comparison there were around 7 million job openings in February 2020.

Zhao said it doesn’t appear that most tech companies are laying off employees or slowing hiring based on anecdotal information, but it was difficult to tell because of the lack of data. However, most tech companies appear to be re-evaluating their hiring plans as the broader economy slows and the threat of a recession looms large, he said.

And although the tech industry’s hiring slowdown may not signal a dramatic change in the broader labor market, it still doesn’t bode well for tech workers because it means they have less leverage over employers, Zhao said. This may mean that workers will have to accept, for example, pay cuts or job opportunities with reduced benefits.

“Even if hired workers are able to find a job very quickly, it is very stressful and means that workers have less leverage to actually find the job that is right for them. , whether it means paying well or using their skills properly,” Zhao said.

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