Are tech layoffs the canary in the US job market?
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The tech industry is laying off workers at an alarming rate as it prepares for a potential recession, raising fears that job losses it could spill over into the broader US economy.
Even though it’s still solid job growth and high wages in many industries, Big Tech is shutting down amid an increasingly bleak economic outlook for the industry.
Alphabet Inc., the parent company of Google, became the latest technology company to cut its workforce, announcing Friday that it plans to cut 12,000 jobs, or about 6% of its workforce. It amounts to one of the largest rounds of layoffs in the company’s history and adds to the tens of thousands of job cuts already announced by Microsoft, Amazon, Twitter, Salesforce and Facebook parent company Meta.
Tech companies have already cut more than 190,000 jobs since the start of 2022, according to Layoffs.fyi, a website that tracks job cuts in the industry. Experts say the job losses are likely indicative of future layoffs in a spectrum of industries within the labor market.
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Workers install a Google display ahead of CES 2023, the world’s largest annual consumer electronics show, on January 3, 2023 at the Las Vegas Convention Center in Las Vegas, Nevada. ((Photo by ROBYN BECK/AFP via Getty Images) / Getty Images)
“This is a harbinger of what is likely to happen later this year across the economy,” Joe Brusuelas, chief economist at RSM, told FOX Business.
Tech layoffs are the result of a phenomenon known as “job hoarding,” Brusuelas said. With unemployment nearing a half-century low and workers in high demand, many companies, particularly those in the technology sector, avoided laying off employees at all costs.
That is evidenced by the number of jobs available in the economy: the government reported earlier this month that there were about 10.46 million jobs at the end of November, the 13th consecutive month that opens have exceeded 10 million. Before the pandemic began in February 2020, the highest level on record was 7.7 million.
but with him The Federal Reserve raises interest rates higher, inflation moderates and consumer spending slows, tech companies are resizing and trying to correct their oversourcing during the COVID-19 pandemic.
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“Regarding technology, this is just the natural consequence of several years of labor accumulation and adjustments to a new era of higher interest rates and the end of easy money,” Brusuelas said. She predicted there will be layoffs across the real economy as more sectors adjust to the post-pandemic era, as well as “declining demand and mild disinflation.”
Although the job market remains healthy and one of the few bright spots in the economy, there are signs that it is beginning to weaken in the face of higher interest rates. The economy added just 223,000 jobs in December, the smallest gain in two years.
High-profile tech job losses may be unique to the sector’s explosive growth during the pandemic and the subsequent normalization, but they are also likely a sign of future layoffs ahead, according to Allie Kelly, chief marketing officer at Employ Inc. ., a provider of real-time hiring data.
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“Because the world doesn’t exist in a vacuum, they are absolute indicators of additional layoffs to come,” Kelly told FOX Business. “Does that mean we’re going to see the kind of massive cuts similar to those that have been dominating the headlines recently? Not necessarily. But it’s hard to ignore the evidence supporting that there are absolutely more layoffs in industries.”
The December jobs report contained some worrying clues about the strength of the labor market, including the fifth consecutive monthly decline in the number of temporary workers and the second consecutive month of reduction in overtime hours worked by employees. These are often the places where companies first buckle down, Kelly said.
Federal Reserve Chairman Jerome Powell speaks during a news conference Wednesday, December 14, 2022, at the Federal Reserve Board Building in Washington. (AP Photo/Jacquelyn Martin / AP News Room)
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federal officials They have made it clear that they expect unemployment to rise as a result of the higher rates, which could force consumers and businesses to cut spending. Updated projections from the central bank’s December meeting show that officials expect unemployment to rise to 4.5% by the end of next year, up from the current rate of 3.5%.
That could mean more than 1 million Americans losing their jobs between now and the end of 2023.
“Ultimately, the other thing to keep in mind is that the Fed doesn’t really care about people keeping their jobs,” Kelly said. “This to them is a means to an end, and what they’re trying to do is get to price stabilization without worrying about people’s jobs.”