Opinion | What the massive tech layoffs mean for the US economy


Hardly a day goes by without announcements of mass layoffs at major tech companies: 8,000 in Salesforce, 10,000 at Microsoft, 12,000 at Google, the largest in the company’s history, and 18,000 on Amazon. IBM and music streaming service Spotify joined the wave of job cuts this week, bringing the total to more than 200,000 pink ballots in technology in recent months. This is a warning for the economy. It’s yet another sign that the consumer spending boom is fading.

The tech layoffs are unlikely to trigger an immediate wave of cuts in the economy or even raise the historically low unemployment rate much. Technology attracts a lot of media attention, but only 2 percent of American workers are employed in tech companies, a much smaller influence on the job market than manufacturing (8 percent of employment), retail (10 percent), or health care (11 percent).

There is a reality check taking place in the technology sector that is not happening anywhere else. Technology not only bounced back quickly from the 2020 pandemic downturn; it benefited from so many people being stuck at home and spending more time on devices. The desperation of Americans to ask for toilet paper and find distractions for their children was a boon for Big Tech, and the industry responded accordingly. Amazonfor example, it doubled its number of employees during the pandemic, and the industry at large went on a hiring spree not seen since late 1990s. (Amazon founder Jeff Bezos owns The Post.) Executives said they believed the economy had changed forever and they needed to win the war for talent in the age of hard-to-find workers. Now, the technology is undergoing a correction, but this is not the end of the industry or even a major reckoning. It’s nothing like the scale of the blue collar job losses beginning of this century.

Where the tech layoffs become more worrisome is on two fronts: First, Wall Street is encouraging the downsizing. Most of the tech companies that have announced layoffs have seen a immediate rebound in their share prices. It’s a signal to other executives that this is the playbook to follow if earnings start to falter. So far, that herd mentality has not permeated beyond technology and the media. In fact, the biggest surprise is how resilient employment has been, especially in sectors hit hardest by the Federal Reserve’s aggressive rate hikes to combat inflation and cool the economy. Despite temp jobs are downemployment in construction and real estate has remained strong, with no big layoffs so far.

The second concern is the impact of tech layoffs on consumer spending. For the most part, tech workers are well paid and their layoffs come with generous severance pay. There is not much sympathy for these workers, who will probably find another job eventually. But for better or worse, the American economy is depends heavily on the spending of the top 20 percent. These are the six-figure-salary workers with money to spend on top restaurants and expensive seats at sporting events or theatrical events, fancy homes they pay to decorate and clean, and lavish vacations. Their spending, or lack thereof, is critical to the rise and fall of the service sector and businesses that rely on discretionary purchases like home furnishings and appliances.

It’s not hard to see how tech layoffs are starting to cause the elite to cut spending. Even workers who keep their jobs are told to expect smaller bonuses and fewer opportunities to advance, at least for a while. Other sources of wealth are also stabilizing. House prices are pulling back slightly in many markets, and major stock indices are still negative During the past year. Headlines declaring a “white collar recession” only add to the more cautious mood at the top. What is happening now for the wealthy is similar to what the middle class and struggling families experienced last spring and summer, when gas prices topped $5 and there was a drop in sentiment.

It remains to be seen how much this hurts consumption. retail sales sunk in decemberand a Morning Consult poll shows that the rich are becoming restless: “In December, the highest income earners recorded the largest drop in the net proportion of adults reporting improved household finances compared to a year ago.” But overall consumption remained strong in the fourth quarter, according to the gross domestic product report. comes out thursdaythough that was before many of the more dramatic layoff announcements.

The latest economic indicators, including tech layoffs, do not point to a Wile E. Coyote moment on the horizon, when everything will suddenly come crashing down. They point more towards a gradual slowdown in which consumers of all income levels become more cautious about vacations, meals out and home repairs. Whether there will finally be a “slow giveaway” or official recession this year remains to be seen. If 2022 was the year of “revenge trips” and leaving home again, 2023 is shaping up to be the year of judicious spending, at home and at work.

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