First a trickle, then a stream, and now a flood. US tech giants lay off thousands of people almost every day. Lovers of the COVID-19 lockdowns have seen profits shrink as lives return to normal after months of staring at screens.
In times of pandemic outbreak, the number of employees MicrosoftGoogle, Amazon and Facebook main Meta Demand for its products and services skyrocketed, while bloated by over-enthusiastic hiring. But once decades of high inflation are under control and operating costs skyrocket, Silicon valley He had no choice but to cut the oil.
According to a tally from research platform TrueUp, tech firms have collectively reduced more than 330,000 positions in the past 12 months, including nearly 90,000 positions since the start of this year.
With inflation still stubbornly high, interest rates rising and growth slowing, the natural consequence is: challenges of the tech industry will quickly spread over a wider area US economy. But economists have suggested several reasons as to why further layoffs may be limited.
Tech sector ‘over-hired’
“Employment in the tech sector is up about 8% from pre-pandemic levels, with total employment just above pre-pandemic levels,” Olu Sonola, U.S. Regional Economics President at Fitch Ratings, told DW. “This indicates that the industry is hiring around 200,000 to 300,000 jobs in 2021 and 2022.”
high-profile names like Twitter, spotify and Tesla represents the future trajectory of the US economy, so any negative news is more likely to make headlines and distort public perception. But because the US has one of the most flexible labor markets in the world, large numbers of workers across all industries change jobs every day.
“The number of layoffs [across the US economy] That’s about 1.5 million each month, versus 30,000 a month in the tech industry,” Karen Dynan, a senior research fellow at the Peterson Institute for International Economics, told DW. [tech] The layoffs have received a lot of attention, but their direct impact on overall U.S. employment has been limited.”
Many tech companies are still hiring
While some tech firms have dropped their positions, many are still hiring aggressively thanks to one company. hot job market This has left employers in various industries struggling to fill vacancies and workers demanding higher wages.
A TrueUp scan of job sites on Friday found more than 179,000 open positions in big tech, startups, and so-called unicorns – startups worth at least $1 billion (€0.92 billion). A survey by ZipRecruit last month found that four out of five US tech workers who were laid off found a new job within three months.
According to a ranking by Indeed.com, eight of the top 10 jobs in the US are still tech roles – including developers, engineers and machine learning – giving technology applicants the best job prospects of any industry in 2023.
Many of the reported job losses also affect non-US employees.
Despite inflation, spending spree continues in the US
Economists are divided on whether the US will enter recession this year, as consumer spending, which accounts for more than two-thirds of US economic activity, remains strong.
According to the US Department of Commerce, consumption fell slightly in November and December. Credit card debt is also on the rise – proof that Americans have to borrow more to maintain possibly unsustainable spending levels.
A clear sign of a recession would be a rise in overall unemployment, though the unemployment rate fell 0.2% to 3.5% in December. The number of first-time claimants for unemployment benefits hit a historic low of 190,000 last week.
Some job losses, but no culling
“We’re seeing signs that some pressures on the labor market overall are lessening – wage growth is softening, use of temporary workers is falling, vacancies are starting to decline. So we’re likely to see increased layoffs in the labor market overall.” said Dynan.
Fitch’s Sonola expects the labor market to “calm down significantly” in 2023, but does not expect tech sector layoffs to spread to the broader job market.
Few analysts expect the same increase in unemployment as in the 2007/8 financial crisis, when the unemployment figure in the US reached 7.5%.
“I’m seeing unemployment creeping from the current historic low of 3.5% in the US to 5% at most,” LinkedIn chief economist Karin Kimbrough told US television broadcaster CNBC.
Many firms in many industries, including education, healthcare and retail, are still struggling to recruit new workers. To lure them, grocery giant Walmart said this month it will raise its wages to over $17.50 an hour – it had already increased its paycheck several times during the pandemic. In 2021, the retailer’s starting fee was $12.
Labor market still tight
Rival chains Target and Costco have made similar moves, and layoffs are unlikely as demand remains strong.
“Companies are very reluctant to lay off workers because they struggle so much to find staff,” Rubeela Farooqi of High Frequency Economics told Agence France-Presse (AFP).
Despite all the recent layoffs, most tech companies are still much larger than they were before the pandemic. Google owner Alphabet has hired more than 100,000 employees since 2018, despite announcing 12,000 layoffs last week. Meanwhile, Amazon’s decision to cut 18,000 jobs is just a fraction of its global workforce of 1.5 million.
One of the outliers is Twitter, which culled nearly half of the social media platform’s 7,500 staff after Tesla’s acquisition by billionaire CEO Elon Musk. He said job losses are necessary to ensure the future of the losing platform.
Edited by Uwe Hessler
