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Tech Companies Fired 330,000 Employees in Only 12 Months

A trickle at first, a stream afterwards, and now a torrent. Nearly every day, US tech titans cut thousands of jobs. After months of looking at screens, the COVID-19 lockdowns’ darlings have seen their revenues decline as life has returned to normal.

After years of phenomenal expansion, Silicon Valley businesses are taking the fall for it and laying off hundreds of thousands of workers. On whether the US economy is experiencing a recession and skyrocketing unemployment, economists are divided.

The headcounts of Microsoft, Google, Amazon, and Facebook parent company Meta expanded excessively during the epidemic boom as a result of hasty hiring as demand for their goods and services skyrocketed. But as operational costs soared and inflation reached levels not seen in decades, Silicon Valley was forced to cut the fat.

According to a count by data platform TrueUp, tech companies have collectively lost more than 330,000 employees over the past 12 months, including roughly 90,000 since the start of this year.

The obvious conclusion is that the problems facing the tech sector will swiftly extend to the larger US economy given that inflation is still stubbornly high, interest rates are rising, and GDP is slowing down. However, economists have given a number of explanations as to why there could not be as many layoffs going forward.

Tech Sector ‘Overhired’

Olu Sonola, head of US Regional Economics at Fitch Ratings, told DW:

This predicts that the industry overhired by 200,000–300,000 employees in 2021 and 2022. While overall employment is just slightly above pre-pandemic levels, employment in the tech industry has increased by around 8% from pre-pandemic levels.

 

High-profile companies representing the US economy’s future trajectory include Tesla, Spotify, and Twitter, so any bad news is more likely to make headlines and distort public opinions.

However, because the US has one of the most flexible labour markets in the world, a significant number of individuals across all industries change jobs every day.

According to Karen Dynan, a senior fellow and non-resident at the Peterson Institute for International Economics, DW:

The number of layoffs [across the US economy] every month is about 1.5 million versus 30,000 per month in the tech sector.

Many Tech Firms Still Hiring

While some tech companies have reduced staff, many others are still actively hiring as a result of a strong labour market that has left employers in a variety of industries scrambling to fill openings and employees demanding greater wages.

More than 179,000 unfilled opportunities were discovered in large tech, startups, and so-called unicorns, new privately held companies valued at least $1 billion, according to a TrueUp survey of job sites on Friday.

According to a survey conducted by ZipRecruiter last month, four out of every five US tech professionals who were let go found new jobs within three months.

According to a list by Indeed.com, eight of the top ten jobs in the US are still in the technology sector, including positions for developers, engineers, and machine learning. This gives tech professionals the highest career prospects across all sectors  industry in 2023.

Many of the announced job losses also affect employees outside the US.

US Spending Continues Despite Inflation

Since consumer spending makes up more than two thirds of US economic activity, economists disagree on whether the US will experience a recession this year.

In November and December, consumption decreased marginally, according to the US Department of Commerce. The fact that Americans are borrowing more to maintain their spending levels, which is probably unsustainable, is shown by the fact that credit card debt is also rising.

A rise in overall unemployment would be a glaring indicator of a recession, yet in December, that number increased from 0.2% to 3.5%. Last week, 190,00 persons filed their first claim for unemployment benefits, a record low.

Some Job Losses But No Cull

Dynan said:

We are seeing some signs of pressures subsiding in the labor market broadly. Wage growth is softening, use of temporary workers is dropping, job openings are starting to come down. So we will probably see layoffs pick up in the labor market generally.

Fitch’s Sonola predicts that the labour market would “substantially chill” in 2023 but does not anticipate that the IT sector’s layoffs will spread to other job markets.

Few economists predict that unemployment will rise by the same amount as it did during the financial crisis of 2007–2008, when the US unemployment rate hit 7.5%.

At most, according to LinkedIn’s chief economist Karin Kimbrough, “I see unemployment creeping up to 5% from the present historic low of 3.5% in the US.”

Many businesses in a variety of industries, including education, health care, and retail, are still having trouble finding new employees. Walmart, the world’s largest retailer of groceries, announced last month that it would increase salaries to more than $17.50 an hour after increasing pay numerous times over the pandemic. In 2021, the retailer’s starting wage was $12.

Labor Market Still Tight

competing chains Given that demand is still high and that Target and Costco have taken similar actions, job cuts are not expected at either company.

According to Rubeela Farooqi of High-Frequency Economics, “Companies are particularly reluctant to let rid of personnel since they’ve fought so much in terms of staffing” (AFP).

The majority of tech companies are still far bigger than they were before the outbreak, despite all of the recent layoffs. Despite announcing 12,000 job cuts last week, Alphabet, the company that owns Google, has added more than 100,000 employees since that year. In contrast, Amazon’s plan to let go of 18,000 employees is a small portion of its 1.5 million global staff.

The only exception is Twitter, which cut over half of its 7,500 employees after Elon Musk, the billionaire CEO of Tesla, acquired the social media company. Both criticism and support have been expressed regarding the employment cuts. While some have warned of a decline in content moderation standards, Elon Musk claimed that the employee cuts were necessary to secure the platform’s future.

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