For the past two weeks, headlines have been dominated by news about big tech layoffs.
Mark Zuckerberg and Meta made their first mass layoffs since the company was founded 20 years ago when it cut 11,000 jobs, while Elon Musk’s takeover of Twitter saw almost 4,000 workers lose their jobs.
Microsoft, Salesforce and Amazon have also made significant job cuts in recent weeks. For instance, Amazon laid off 10,000 workers, while Microsoft laid off 1,000 employees globally.
Looking across the entire tech sector, according to aggregator Layoffs.fyi, almost 130,000 employees have lost their jobs in 2022 so far. This is across 800 companies.
Of course, these layoffs are happening in the context of record-high inflation in the US and the UK, as well as a cost of living crisis. The UK has now entered a recession; is the US, where most of these tech layoffs are happening, on the same path?
But Goldman Sachs analysts have confirmed that these tech layoffs are not an indicator of a recession or that we are facing a labor market crisis.
Goldman Sachs analysts weigh in
First off, Goldman Sachs reminded its clients in an analyst note that the tech industry only accounts for a very small proportion of jobs in the US.
As reported by Yahoo, Goldman Sachs chief economic Jan Hatzius told clients: “The tech industry accounts for a small share of aggregate employment — for example, the unemployment rate would rise by less than 0.3 percentage points even in the inconceivable event that all workers employed in the ‘internet publishing, broadcasting and web search portal”’ industry are immediately laid off — so any drag on the overall labor market should be small.”
Secondly, “tech job openings remain well above their pre-pandemic level, so laid-off tech workers should have good chances of finding new jobs.”
In the tech sector, the increase was 6.3% or 206,000 – this was higher than the increase in sectors like education, government or manufacturing and construction.
As reported by the New York Times, US unemployment rates for high-tech jobs are almost non-existent; Robert Half data shows that each tech worker looking for a job has at least two offers.
The third reason why Goldman Sachs is not worried about big tech layoffs as an indicator for a recession is that: “Tech worker layoffs have frequently spiked in the past without a corresponding increase in total layoffs and have not historically been a leading indicator of broader labor market deterioration, and layoffs in other industries still look limited.”
The main take away is there no need to panic. Big tech has experienced a long period of boom, its profitability struggles won’t necessarily impact the wider economy.
Yes layoffs are horrible for the workers they impact, but it looks like tech workers have a good chance of finding new opportunities, and there is no reason to see them a sign of impending doom.
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