Thousands at Meta, Twitter, Salesforce lost jobs this week—the shock could ripple through the economy for months
Tens of thousands of tech workers have been laid off within days, as tech giants including Meta, Twitter, Salesforce and others shed headcount going into the final stretch of the year. At least 20,300 U.S. tech workers were let go from their jobs in November, and more than 100,000 since the beginning of the year, according to Layoffs.fyi, which tracks layoffs in the field.
Tech workers reported huge drops in confidence in their job security through the summer, as news of layoffs, hiring freezes and rescinded offers put a damper on what's so far been a worker-driven Covid pandemic recovery.
But the latest headlines are all converging at once as businesses course-correct on over-hiring and acknowledge how rising interest rates are thwarting their growth plans, says ZipRecruiter chief economist Julia Pollak.
She says layoff numbers, even in the thousands, are "not surprising" given how the Fed's raising of interest rates has made it harder for companies to borrow, caused stock prices to dip and makes U.S. products too expensive for foreign markets.
The latest economic volatility disproportionately affects tech and could impact other downstream industries, Pollak adds.
How tech layoffs could impact the economy
Tech sector cuts will have a ripple effect: Fewer companies prepare to go public, so investment banks take a hit. Companies work to quickly conserve cash by slashing advertising spending, which also impacts media companies. Companies reduce their workforce and suddenly don't need HR staff and recruiters anymore.
And junior-level workers will be hardest hit "as companies tighten their hiring needs and focus on experienced talent when filling new roles," says Josh Brenner, CEO of the tech jobs marketplace Hired.
With all that said, layoffs have "so far been concentrated in narrow industries in Silicon Valley and Wall Street," Pollak says, and are "still offset by tremendous economic resilience on Main Street," where employers are struggling to hire to keep pace with consumer demand in travel, hospitality, leisure and other service sectors.
Hiring is still strong despite economic headwinds, according to the Labor Department's latest jobs report, and Pollak says employers are adding 60% more jobs each month than prior to Covid. Jobs in health care and within major enterprises of 5,000-plus workers are doing especially well. Layoffs remain historically low at 1.3 million, or under 1% of the workforce, and there are still nearly two job openings for every available worker.
Pollak says that as of October, 2022 is the best year on record (since 2000) for having the lowest number of layoffs per month. That could change in the last months of the year, at which point it could fall just behind 2021's record-low layoff numbers.
Even with tens of thousands of tech workers laid off this month, "in aggregate, it's still largely offset by what's happening in blue collar industries and manual service industries where companies are hoarding workers and very reluctant to let them go," Pollak says.
Laid-off workers still have opportunities, just maybe not in the tech sector
Newly laid off workers will face more competition on the job market, which since 2021 has favored workers able to negotiate for big pay raises, better hours, flexible schedules and generally better jobs.
With that said, Pollak says, "many tech companies with strong profit margins are seeing their revenue grow or are holding steady, and are still continuing to hire. At companies struggling to find talent in the last year, talent acquisition teams are sitting at the ready to download the spreadsheets listing laid-off workers and start making calls."
Brenner agrees, referencing Hired's 2022 state of tech salaries report showing "the window to acquire tech talent has narrowed, and employers continue to widen their talent pipelines to ensure they get the top talent needed."
Tech workers, and workers at tech companies, will still have lots of job opportunities at smaller companies and outside the tech industry, Pollak says — including health care, retail, the government and even agriculture. Tech job seekers on Hired are also flocking to financial services jobs, Brenner adds.
Most tech job seekers stay within the industry, but they have other options. According to ZipRecruiter data, 74% of tech workers who started a new job within the last six months stayed within the tech sector, according to an October survey of 2,500 Americans.
Among the 26% who found work in other industries, 6% went into retail or e-commerce, 5% went to work for a financial tech company, 2% moved to health care, and 2% moved to professional business services.
"Workers will likely have to take less attractive offers than they found in the heart of the tech sector," she adds, "but these will continue to be relatively highly paid jobs with attractive career growth prospects, enormous flexibility and autonomy."
A final thought, Pollak adds, is how tech-sector tumult could motivate some people to start their own companies.
"Many of today's best household-name tech companies started in the shadow of the Great Recession," she says, such as Airbnb, Uber and Dropbox. "This is obviously not the best financing environment to start a company, but we could still see some people becoming entrepreneurial through necessity. With a lot of tech geniuses dumped out on street at once, they might find each other and build the scrappy tech startup that could become the next FAANG company."
Want to earn more and work less? Register for the free CNBC Make It: Your Money virtual event on Dec. 13 at 12 p.m. ET to learn from money masters like Kevin O'Leary how you can increase your earning power.
Check out:
Sharing your layoff on LinkedIn isn't an 'act of shame' anymore—and it could be a smart career move
$2 million ranges, deleted job posts: NYC's salary transparency law is off to a rocky start
Cold and flu season is here, and people are showing up to work sick again