The Effects of Pandemic Over-Hiring Are Here
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When the COVID-19 pandemic hit in 2020, tech firms such as Amazon, Microsoft and Google hired tens of thousands of employees to meet demand. Fast-forward to 2023 and after nearly two years of enjoying a booming jobs market, tech workers are now losing their jobs. In just the first quarter of 2023, over 95,000 tech jobs have been eliminated.
What’s Driving the Layoffs?
A few years ago, when large tech corporations elected to, in some cases, double their headcounts, most agreed the technology sector was simply staying in step with the need for new talent. However, in 2022, key economic factors combined to create a perfect storm abruptly forcing the tech sector to pivot into correction territory.
Most analysts point to four key factors for what we’re seeing in the current technology job market:
Economic Uncertainty
U.S. recession buzz escalated when data from the U.S. Bureau of Economic Analysis in July 2022 showed a shrinking economy for the second straight quarter. Downsizing by cutting jobs is a key survival tactic during uncertain times.
A Decrease in E-Commerce Activity
The pandemic drove many businesses (and consumers) online as they adapted to lockdowns. Online shopping and remote work became the new normal as tech firms began hiring in large numbers. However, recent research by the Harvard Business School reveals e-commerce activity is at or below pre-COVID-19 trend levels in the United States. Consequently, mass tech layoffs are partly the result of the world returning to a pre-pandemic normalcy.
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Pressure from Investors
When corporate profits began to shrink and expenses swelled, most investors became concerned and pushed for job cuts to offset expenses. Companies facing pressure from investors, such as Alphabet and Meta, responded accordingly by reducing headcounts.
In Response to a Mature Industry
Industries mature as part of their natural growth, and it’s typical for tech companies to see a “flattening” new customer curve. Some firms try diversifying its products or expanding to other countries/markets. However, when these strategies fail, they have few options but to lay off workers.
The result is a technology job market that has evolved from what was once a hot “workers” market to a an “employer-advantage” market. One bright spot is the recent January jobs report released by the Bureau of Labor Statistics, which showed that in total across all job industries, over 500,000 new jobs were created in January.
While the layoffs in the tech industry might present strong headwinds for current job seekers, it’s worth remembering that talent has a way of finding new opportunities.
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