Tech layoffs might not be a harbinger of doom after all

Big layoffs at companies like Amazon, Lyft, Meta, and Twitter might not be a harbinger of a recession or market crash for the broader economy, recent reports indicate—and they may not even indicate that the job market is all that bad for tech workers.

In November, analysts at Morgan Stanley wrote that the 187,000 tech jobs cut since December 2021 comprised only around 0.1% of US payrolls, adding they saw few signs that mass firings at high-profile tech firms are “the canary in the coal mine.”

That same month, Goldman Sachs analysts wrote in a report shared with IT Brew that tech job openings remained well above their pre-pandemic levels, while layoffs in the sector “have not historically been a leading indicator of broader labor market deterioration.” What’s more, a Morning Consult poll found that tech workers reporting lost income in the last four weeks dropped from 15.3% in early October to 11.6% by November 19.

Morning Consult economist Jesse Wheeler told IT Brew that the survey indicated that tech workers are now reporting lost income in the last few weeks similar to those across all fields, and tech workers that faced layoffs may be finding new jobs relatively quickly. Across the entire economy, he added, data indicates initial unemployment claims remain “very low” and job growth “remains strong although slowing.”

“We’re seeing a little bit of a loosening of demand in the labor market, but we’re not seeing any kind of big cracks or any indication that these tech layoffs are impacting the broader economy or labor market,” Wheeler told IT Brew. “What we’re seeing in our last pay data is surprising and positive for both workers in the tech industry, and then also in the broader labor market.”

Labor Department data for November showed the US economy added 263,000 jobs overall, with the unemployment rate remaining at 3.7%. Jim McCoy, SVP of enterprise solutions for ManpowerGroup, told CNN most tech workers are being reabsorbed into the economy as “most companies are digital at this point.”

Wheeler said low interest rates, a pandemic-era boom in demand for tech services, and “exuberance” in the stock market concentrated in a relative handful of big name tech firms was “the tip of the white hot labor market.”

“That’s since started to cool off,” Wheeler added. He told IT Brew one unknown factor was whether further contractions could still be coming, as some tech firms have yet to move forward with announced layoffs.

Tech workers remain uneasy. The Morning Consult poll found that between September and November, 16% of tech workers said they expected to lose income in the next month, compared to 11% of all workers. While up from the last quarter, that’s significantly lower than the first half of the year, when over a quarter of employed tech workers feared pink slips, according to poll data shared with IT Brew.—TM

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