Why Tech Layoffs Aren’t Alarming Economists—Yet

[dasari4kntr]

Google, Amazon, and others went on hiring sprees during the pandemic and now are cutting back. But the labor market is strong.

Spotify on Monday became the latest major tech company to announce layoffs this year, joining the likes of Google, Microsoft , and Amazon  downsizing as they adapt to high inflation and slower-than-expected growth.

More than 57,000 tech workers have lost their jobs so far this month, according to the website layoffs.fyi, a start-up that aims to track total layoffs in the tech space. That is more than one-third the total number of layoffs the sector saw in all of last year—and there’s still another week left in January.

Yet economists continue to shrug off the tech layoffs as too limited to drag down the economy. “There’s just not reason to panic just yet,” says Rachel Sederberg, senior economist with labor market analytics firm Lightcast.

Tech, though dominant in most Americans’ daily lives, represents just a small sliver of the broader labor market. The so-called “information” sector, which encompasses most tech firms, employed just 2% of all workers in December, according to Labor Department data.

Tech companies grew rapidly over the past three years as the Covid pandemic led millions of Americans to embrace technology in new ways. Boosted by the low-interest rate environment in 2020 and 2021, tech firms invested heavily—and hired in huge numbers—as they raced to try to attract new consumers looking to buy groceries, meet with co-workers or talk to their doctors online for the first time.

But now the bill is coming due. As interest rates rise and inflation eats into company profits, businesses are deciding which of their bets paid off and which are dragging down growth. And they are reorienting their companies, and their workforces, to reflect that.

“Tech companies grew extremely rapidly to take advantage of a once in a lifetime opportunity…to go after even low-propensity potential customers and try to get them the best experience possible,” says Julia Pollak, a labor economist with the job-search site ZipRecruiter .

“What you’re seeing is more like a rebalancing within the companies,” she adds. “They’re unwinding bets that didn’t work out while doubling down on bets that did.”

Even the tech companies doling out layoffs aren’t downsizing massively, especially when considering how much hiring they had done in recent years. Google, for one, increased its head count by more than 50% since the pandemic began and added 37,000 jobs in the past year, Pollak notes. The 12,000 jobs being cut represents less than a third of what was added in just the last 12 months.

There’s a third reason not to worry: Many tech employees are receiving generous severance packages and finding new jobs quickly, given how sought-after their skill set is. That limits the economic impact of the layoffs.

It could also explain why applications for unemployment insurance have been falling steadily in recent weeks and remain near record lows, despite the layoff announcements. Severance pay excludes workers in some states from applying for unemployment aid. Tech workers who have been highly paid may also feel they don’t need to apply right away for benefits.

The high-profile layoff announcements come as the broader labor market remains tight by nearly all measures. The unemployment rate is at 3.5%, matching its half-century low. The share of employees being laid off or discharged each month is holding steady at 0.9%, just a tick above its lowest level on record.

“This is a drop in the bucket in the larger economy,” Sederberg says. “It was just over exuberance on the part of these technology firms facing a very different reality than they had in the past. Now that reality is changing again, and they’re making adjustments.”

It’s still possible, of course, that the labor market takes a hit later this year if the economy slows as the Federal Reserve works to cool inflation. But don’t consider the latest wave of technology job losses the canary in the coal mine.

[dasari4kntr]

summary….

ee tech layoffs nothing anta…

[Democraticcompulsion]

Covid ki mundu X headcount unte, ippudu 2X undi in a lot of places. 

Cutting 10% makes it 1.8X pre covid. Still heavy Ani analysts opinion. Aa .8X kooda teesedaka santinche la leru nikrushtulu.

[Paamu]

This is not final kadaa. I feel this is just the beginning ….. year first month lo ne inni started… ponu ponu inka ekkuva untay ani anipistundi. 

[CherryGaru]

1 hour ago, dasari4kntr said:

Google, Amazon, and others went on hiring sprees during the pandemic and now are cutting back. But the labor market is strong.

Spotify on Monday became the latest major tech company to announce layoffs this year, joining the likes of Google, Microsoft , and Amazon  downsizing as they adapt to high inflation and slower-than-expected growth.

More than 57,000 tech workers have lost their jobs so far this month, according to the website layoffs.fyi, a start-up that aims to track total layoffs in the tech space. That is more than one-third the total number of layoffs the sector saw in all of last year—and there’s still another week left in January.

Yet economists continue to shrug off the tech layoffs as too limited to drag down the economy. “There’s just not reason to panic just yet,” says Rachel Sederberg, senior economist with labor market analytics firm Lightcast.

Tech, though dominant in most Americans’ daily lives, represents just a small sliver of the broader labor market. The so-called “information” sector, which encompasses most tech firms, employed just 2% of all workers in December, according to Labor Department data.

Tech companies grew rapidly over the past three years as the Covid pandemic led millions of Americans to embrace technology in new ways. Boosted by the low-interest rate environment in 2020 and 2021, tech firms invested heavily—and hired in huge numbers—as they raced to try to attract new consumers looking to buy groceries, meet with co-workers or talk to their doctors online for the first time.

But now the bill is coming due. As interest rates rise and inflation eats into company profits, businesses are deciding which of their bets paid off and which are dragging down growth. And they are reorienting their companies, and their workforces, to reflect that.

“Tech companies grew extremely rapidly to take advantage of a once in a lifetime opportunity…to go after even low-propensity potential customers and try to get them the best experience possible,” says Julia Pollak, a labor economist with the job-search site ZipRecruiter .

“What you’re seeing is more like a rebalancing within the companies,” she adds. “They’re unwinding bets that didn’t work out while doubling down on bets that did.”

Even the tech companies doling out layoffs aren’t downsizing massively, especially when considering how much hiring they had done in recent years. Google, for one, increased its head count by more than 50% since the pandemic began and added 37,000 jobs in the past year, Pollak notes. The 12,000 jobs being cut represents less than a third of what was added in just the last 12 months.

There’s a third reason not to worry: Many tech employees are receiving generous severance packages and finding new jobs quickly, given how sought-after their skill set is. That limits the economic impact of the layoffs.

It could also explain why applications for unemployment insurance have been falling steadily in recent weeks and remain near record lows, despite the layoff announcements. Severance pay excludes workers in some states from applying for unemployment aid. Tech workers who have been highly paid may also feel they don’t need to apply right away for benefits.

The high-profile layoff announcements come as the broader labor market remains tight by nearly all measures. The unemployment rate is at 3.5%, matching its half-century low. The share of employees being laid off or discharged each month is holding steady at 0.9%, just a tick above its lowest level on record.

“This is a drop in the bucket in the larger economy,” Sederberg says. “It was just over exuberance on the part of these technology firms facing a very different reality than they had in the past. Now that reality is changing again, and they’re making adjustments.”

It’s still possible, of course, that the labor market takes a hit later this year if the economy slows as the Federal Reserve works to cool inflation. But don’t consider the latest wave of technology job losses the canary in the coal mine.

 

Tech, though dominant in most Americans’ daily lives, represents just a small sliver of the broader labor market. The so-called “information” sector, which encompasses most tech firms, employed just 2% of all workers in December, according to Labor Department data.

I agree.. Interest rates inka penchali, inflation thagali ante. There will be no recession this year.