Tech jobs feel like they’re vanishing quicker than steam from a pot of boiling water lately.
Google’s parent company Alphabet recently laid off 12,000 workers, equivalent to 12% of its workforce. Meta cut an even bigger share of its staff. Even IBM, which has been in business for 111 years, is cutting thousands of jobs.
Since the start of the year, 297 tech companies laid off nearly 95,000 workers, according to data compiled by Layoffs.fyi, a website that’s been tracking tech layoffs since March 2020. If that rate continues, the industry could cut more than 900,000 jobs in 2023. That’s nearly six times the total for the industry in 2022, according to the site.
But the sky isn’t exactly falling in the tech industry, or at least not yet.
Here’s why:
Tech jobs were growing before the pandemic
Before the pandemic, the tech industry was steadily growing. As investments in cybersecurity, cloud computing and artificial intelligence poured into companies, their need for employees grew.
In the five years leading up to the pandemic, the tech industry added 1.3 million workers, according to an analysis of Bureau of Labor Statistics data by CompTIA, an information-technology trade group.
Tracking tech layoffs:Why companies like Amazon and Meta cut jobs in 2022
Who decides who gets cut?:Layoffs in a likely recession this year could be determined by software programs
The earlier hiring wasn’t as widely publicized as the hiring that occurred in 2021. That resulted in a “perception issue that there was so much more demand during the past two years compared to previously,” said Tim Herbert, chief research officer at CompTIA.
The perception that tech hired an unprecedented level of workers also may have misled people to believe that recent layoffs were heftier.
The pandemic forced companies to layoff workers
When COVID-19 swept across the country, consumers quickly tightened their purse strings, resulting in massive job losses.
And even though demand for tech workers was strong leading up to the pandemic, like almost every industry, tech was not immune to layoffs during the crisis. In August 2020 tech unemployment peaked at 4.6% while the nation’s overall unemployment rate was 8.4%.
‘I was too ambitious’:Spotify CEO announces layoffs among 6% of employees as tech job cuts continue
‘A huge windfall’:Automakers look to hire tech talent from job cuts in Silicon Valley
Tech goes on a hiring spree as economic conditions improve
Economic conditions improved in the fall of 2020, much faster than tech companies anticipated. Demand for electronics like computers, gaming systems and smartphones exploded as the government issued stimulus checks and enhanced unemployment benefits.
But to get products to consumers, tech companies had to navigate broken supply chains and transform themselves into more e-commerce-driven businesses.
To succeed and seize the opportunity to profit from unprecedented demand, tech companies needed more manpower and they needed it immediately, said Herbert.
To meet the unprecedented demand tech went on a hiring spree.
Interest rates go up, eating into tech profits
When the Federal Reserve started hiking interest rates in March 2022 to get inflation under control, tech companies felt the pain because they’re more reliant on outside funding than other industries. When interest rates increase, it’s more expensive for them to borrow money.
Meanwhile, many consumers stopped buying electronics after they depleted their stimulus money. Tech stocks got crushed in the months after the Fed’s March rate hike.
The companies that went on hiring sprees did a 180 degree turn and began cutting. Apple, though, which hired the least number of new workers among the other four big-tech companies, has avoided layoffs so far.
While the layoffs are alarming, they represent a relatively small share of tech companies’ workforces in 2022. And even with the layoffs, all five big-tech companies have bigger workforces now than before the pandemic.
Laid-off tech workers are finding new jobs
Even though tech layoffs are growing, the tech unemployment rate is dropping. In January the tech unemployment rate fell to 1.5% from 1.8% in December, according to CompTIA’s analysis.
That indicates that “many of the laid-off workers were quickly reabsorbed back into the tech workforce,” said Herbert.
The hiring is most likely coming from small and mid-size companies that are still facing worker shortages because they couldn’t previously compete with the salaries and perks traditional Silicon Valley tech companies used to lure in new talent, he added.
Relative to the entire industry, big tech accounts for a relatively small share of the entire tech workforce. Small and mid-size companies make up the bulk of the industry. They, for the most part, are doing OK for now.
But the future is a big question mark.
“At some point, we probably should prepare to see some of these (tech) layoffs show up in the numbers,” Herbert said.
Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can follow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here
Story Credit: usatoday.com