US – Recession or Not?
There are differing opinions among experts as to whether or not the US is heading into a recession this year….
Read moreFocused Partners view on job stability in the Tech sector
We’re often asked by candidates whether they will have more job security at Company A over Company B (whether large, small, publicly traded, or not). We can speak to the Technology sector when we say that all tech companies lay people off… and company size make no difference to that fact.
It’s not about the size or brand awareness of a company. It’s about their success… and that success can be attributed to a large number of reasons. We’ve helped tiny companies grow steadily while some of their much larger competitors shrank and laid people off… and vice versa.
Don’t be fooled into assuming you have a greater chance of staying employed at a larger company. What you really need to evaluate is the company itself and their growth potential… not their current size.
Mass layoffs
There has been a steady stream of major layoffs for months now: Amazon laid off 18,000; Alphabet laid off 12,000; Meta 11,000 with more looming; Salesforce 9090; IBM 3900; Twitter 3740; Goldman Sachs 3,200; SAP 3000; Paypal 2083; Kraken 1,100; Capital One 1,100…. That is a very abbreviated list and these are just the headliners. Many, many smaller companies have been laying off staff.
In 2022, 140,000 were laid off from tech companies. According to Crunchbase News, more than 66,000 workers in US-based tech and finance companies have lost their jobs in mass layoffs in the first six weeks of 2023.
Despite overall layoffs across all sectors being lower now than pre-pandemic levels, the Technology and Finance sectors have seen a much higher level of employee terminations. The mass layoffs around tech and finance are a result of companies having hired too many people during the rebound from the pandemic. The increase in Tech and Finance layoffs coincides with the Fed’s interest rate hikes, and fears of recession. Finance, real estate and tech are particularly affected by interest rates.
Tight labor market
It is probably no consolation to those who have lost their jobs to know that they are the exception and that according to the US Department of Labor, the US labor market had a nearly all-time low of 1.4 million lay-offs in 2022. That’s less than 1% of the workforce. At the same time there were 10.5 million job openings, or 1.7 vacancies per available worker. 6.1 million hires against 5.9 million separations, either forced or voluntary.
The December key numbers as reported by the US Bureau of Labor Statistics are as follows:
Job openings level 11,012,000 in December 2022
Job opening rate 6.7%
Hires rate 2.0%
Turnover rate 3.8%
Quits rate 2.7%
Layoffs/discharges rate 1.0%
Current US civilian labor force is almost 165 million.
Current unemployment is at a record low of 3.5%.
In January 2023, layoffs overall are still remarkably low, despite these high tech profile mass layoffs.
The labor market has been tight since early 2021. Hiring is tough. The power is in the hands of the employee.
Job hopping
4.2 million people quit in November 2022 making it the 18th month in a row where more than 4 million Americans voluntarily quit their jobs. High turnover seems to be the new way. 96% of workers are looking for a new job in 2023, mostly in search of better pay. 40% say they need a higher income due to inflation (6.5%). Other reasons for quitting are no room to grow or a toxic work environment. The answer seems to be job-hopping. The average wage increase for people who change companies is higher than for those who don’t.
Recruitment is up
Despite all the layoffs, there is a talent shortage which is proving expensive for employers. It’s notable that 36% of those who got a new job in the second half of 2022 were recruited for the role. This compares to about 20% in pre-pandemic days.
Enterprise companies who are more resistant to economic shocks are posting record job openings. They are the winners in hiring.
90% of main street business owners who are hiring reported no or too few qualified applicants for open positions.
The road ahead
The struggle to find employees is likely to continue for some time. But the strong labor market is likely to get softer as the Fed continues to raise interest rates and inflation comes down. Consumers are likely to spend less which will in turn reduce the size of workforce needed by companies to meet consumer demand.
For employers, the answer to encouraging their employees to stay, is paying higher wages and improving the work environment. This applies to hiring too: pay competitive wages and make the company and its culture as attractive as possible so that the candidates available want to join and stay.
