Massive Tech Layoff: Will it Shake up the U.S. Job Market?
The massive tech worker layoff, which started in 2022 and has extended into 2023, has led to more than 200,000 employees being let go and has many examining its effect on the U.S. job market.
“More than 66,000 workers in U.S.-based tech companies have been laid off in mass job cuts so far in 2023, according to a Crunchbase News tally, and the year is just getting started,” reported Keerthi Vedantam for CrunchBase. “Last year, more than 140,000 jobs were slashed from public and private tech companies as they were forced to confront rising inflation and a tumultuous stock market.”
While pain is being felt in households across Silicon Valley and other tech havens, many job sectors of the U.S. economy remain red-hot.
Tech Layoff Scorecard: From Amazon to Twitter
If you are keeping a scorecard on recent tech layoffs, you better be using a whiteboard as the numbers change daily.
Here are some of the reported layoffs among the more notable companies:
- Dell announced on Feb. 6, 2023, it was going to cut 6,650 jobs or 5 percent of its global workforce.
- PayPal announced 2,084 employees to be laid off on Jan. 31, 2023.
- Groupon announced another 500 cuts on Jan. 30, 2023, for 1,000 total employees laid off.
- SAP said it would eliminate up to 3,000 jobs on Jan. 26, 2023.
- IBM announced 3,900 jobs to be cut on Jan. 25, 2023.
- Google parent, Alphabet, said on Jan. 20, 2023, it was cutting about 12,000 jobs.
- Also on Jan. 20, 2023, Wayfair announced 2,620 employees to be cut.
- Microsoft announced it will eliminate 10,000 jobs on Jan. 19, 2023.
- Coinbase laid off 2,110 employees on Jan. 10, 2023.
- Twitter, under Elon Musk’s leadership, had cut 3,740 jobs by Jan. 5, 2023.
- Amazon on Jan. 4, 2023, said it would be laying off 18,000 employees, the single largest number of job cuts at a tech firm since the industry began downsizing.
- On the same day as Amazon’s big announcement, Salesforce announced another 8,000 positions to be cut, bringing the company’s layoff total to 9,090.
- DoorDash cut 1,250 employees on Nov. 30, 2022.
- Cisco announced on Nov. 16, 2022, that it would cut more than 4,100 jobs.
- Meta (Facebook, Instagram, and WhatsApp’s parent company) announced in early November that it will lay off 11,000 employees.
- Peloton announced new layoffs in October that brought the number of employees affected in 2022 to 4,084.
Keep in mind that these tech layoffs come after the U.S. tech industry added employees for 25 consecutive months through December, according to data from CompTIA.
Historic Low Employment in U.S. Despite Layoffs
While almost a quarter of a million tech jobs lost sounds like a major blow to the U.S. economy, the reality may be much different.
“While job loss can be traumatic for workers, especially from long-held jobs, the reality is that these large-scale layoffs in tech are just a tiny blip in the U.S. labor market, with its 160 million workers,” writes Dean Baker in The Los Angeles Times. “In a strong labor market, like the one we’re in currently, close to 1.4 million workers are fired or laid off from their jobs in an average month. Another 4 million leave their jobs voluntarily. With more than 6 million workers getting hired each month, most of those who lose their jobs can count on relatively short spells of unemployment.”
Indeed, on Feb. 3, 2023, in the midst of more high-profile tech layoffs, the U.S. Department of Labor’s Bureau of Labor Statistics released the monthly Jobs Report which showed that the unemployment rate had dropped to 3.4 percent, the lowest level in 54 years.
“Employers added a booming 517,000 jobs in January as hiring unexpectedly surged despite high inflation, rising interest rates, and the prospect of a weakening economy,” reported USA Today.
While the tech sector was pulling back, many sectors, especially those that use skilled workers, were hiring:
- Leisure and hospitality, a sector hit hard by the pandemic, added 128,000 jobs, mostly at restaurants and bars.
- Professional and business services added 82,000 jobs.
- Health care added 58,000 jobs.
- Retail added 30,000 jobs.
- Construction added 25,000 jobs.
- Transportation and warehousing added 23,000 jobs.
- Manufacturing added 19,000 jobs.
How the Tech Layoffs Will Affect U.S. Job Market
These so-called “Loud Layoffs” – the big-name announcements of thousands of employees being laid off at recognizable companies – affect the U.S. job market.
“Tech is on edge,” one economist told CNBC. “But we may not see the real impact on the overall labor market for several months if laid-off workers run out of severance and begin to file for jobless benefits en masse.”
Here are some different ways the current tech employment tumble could affect the broader job market:
- Panic Job Seekers: ZipRecruiter chief economist Julia Pollak told CNBC that these “Loud Layoffs in tech have a disproportionate chilling effect” because they are occurring in a “bellwether industry that shapes our moods, and a slowdown there is causing job-seekers more broadly to worry jobs are becoming less available.”
- Make Tech Sector Less Attractive to Future Job Seekers: Tech, with its splashy perks, has been on a hiring spree since the pandemic started and other sectors can rarely match its hiring power, but future job seekers may give pause to applying for tech jobs because of the current layoff culture.
“Given the scope of the downsizing in tech and the well-publicized reasons those decisions were made, we are likely to see many tech professionals think twice about taking their next role at either a tech giant or startup,” Nick Kolakowski, senior editor at Dice, told Recode.
- Other Sectors Tap into Talent: The silver lining of the layoffs for other sectors is that they may be able to tap into some top talent that previously they couldn’t hire.
“To companies outside tech who couldn’t offer such high salaries or didn’t have the cultural draw of the Googles of the world, the present moment is a chance for them to hire the tech workers they’ve long wanted, if they can make themselves attractive enough,” Wrote Rani Molla in Vox.
Graham Waller, Gartner Research VP analyst agreed: “It certainly presents an opportunity for traditional employers — banks, retailers, healthcare companies — to tap into and maybe win back some of the employees that left them.”
- Laid-Off Workers May Strike Out on Their Own: The entrepreneurial spirit is strong in the U.S. and some of the tech workers being laid off may opt to start their own companies and bring new and fresh ideas to market. The next TikTok may already be incubating in the garage of a Silicon Valley laid-off worker.
- Salaries in Tech Sector Should Ease: Fortune says that “with experienced tech professionals looking for work once again, salaries are likely to deflate and higher levels of experience and education will be required to secure employment. These corrections in the industry are potentially a sign it’s falling in line with other, more established parts of the market.”
- Layoffs Could Spread Across Other Industries: Stanford Graduate School of Business professor Jeffrey Pfeffer is concerned that copycat behavior from the tech layoffs could spread across other industries, often without valid reasons.
“Layoffs are contagious across industries and within industries. The logic driving this, which doesn’t sound like very sensible logic because it’s not, is people saying, “Everybody else is doing it, why aren’t we?” Retailers are pre-emptively laying off staff, even as final demand remains uncertain. Apparently, many organizations will trade off a worse customer experience for reduced staffing costs, not taking into account the well-established finding that is typically much more expensive to attract new customers than it is to keep existing ones happy,” Pfeffer said.
The bottom line is we may not know how these tech layoffs will affect the U.S. job market for several months until severance payments run out, and many workers may find new employers long before that occurs.
“While layoffs from high-profile firms make the headlines, plenty of firms are desperate for more workers, especially tech workers. Those workers are in high demand from the auto industry to the Department of Veterans Affairs to not-for-profits," Robert Frick, corporate economist at Navy Federal Credit Union, told CBS News. "The labor market is still so tight that many tech workers, and workers with other skills, are snapped up well before they need to collect an unemployment check. And they are more likely to be snapped up by smaller firms, which have a much greater demand for workers than major corporations.”