Tech layoffs, hiring slowdown stand out in red-hot job market
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U.S. employers added more jobs than expected in AprilThe Bureau of Labor Statistics released Friday’s report amid tight labor markets.
However, the tech sector that soared in the wake of the pandemic shows signs of slowing down.
Facebook parent company MetaIs pausing the hiring process and scaling back some of my recruitment plans. Insider reportedThe memo was an internal memo the company had reviewed. It was used as its basis for last week. CNBC spoke with a spokesperson who said that they regularly evaluate their talent pipeline in accordance to business needs. “In light of this expense guidance, we are slowing down its growth accordingly.”
Amazon’sThe company’s CFO spoke to analysts about its financial condition earnings callIts warehouses are now “overstaffedAfter a huge hiring spree that occurred during extensive lockdowns that drove shoppers more towards online shopping,
This is not only true for the largest tech companies.
Uber’s Chief Executive Officer told employees in a message obtained by CNBCAccording to the company, hiring would be a privilege. They will also be careful about adding headcount and when.
Brokerage RobinhoodIt was recently said that it is cutting about 9% of full-time employeesTo eliminate overlaps in job roles after large-scale hiring. PelotonIt had been announced that it would be happening earlier in the year. reduce its corporate workforce by about 20%in a cost-cutting move. Cameo is a start-up that offers celebrity videos shoutouts and recently laid off a quarter its staff. The Information first reported.
This contrasts sharply with the rest the economy, which has job-seekers who still retain considerable bargaining power while employers struggle to cope with rising labor prices amid inflation and waves of resignations. The April report showed 78,000 job gains in hospitality and leisure. This indicates that the market is recovering for preandemic activities.
Experts say the current factors that are weighing down the tech industry have nothing to do with a rapidly growing sector during the pandemic. This doesn’t mean there is a wider slowdown. Some of the stress could be caused by macroeconomic trends which may later affect other industries. However, many economists predict that tight labor markets will remain for some time due to an aging U.S. workforce and other factors.
It can be hard to find trends in tech because of the many business models in this industry. These include advertising on Facebook and warehousing Amazon products. Veneta Dimitrova (a senior U.S. economist at Ned Davis Research) said that there is no leading trend in the sector’s information for overall growth.
However, it is possible that inflation could be an issue in tech-hiring, as it has been with other parts of the economy.
Terry Kramer from the UCLA school for management is adjunct professor.
“Inflation is at 8%Kramer stated that economic growth has slowed and people aren’t buying as often. To me this is more of the Amazon story. With ecommerce being their main platform, consumers are more careful about purchasing products. Consumers have less money to spend on an inflation adjusted basis.
Amazon is a firm that will experience inflation. This means their costs will increase. Agron Nicaj is associate economist with The Conference Board. He explained that if the demand for their services and products does not rise as fast as they would like, it could impact their margins. So they have to slow down growth.
However, slowdowns at companies might be less specific to the businesses. Kramer, for instance, attributed Meta’s recent hiring freeze to AppleThe privacy settings of the iPhone are being updated hurt Meta’s ability to target ads.
The biggest beneficiary of behavioral changes during the peak of the pandemic was the tech industry. As people spent less time in offices and more at home, many investors turned to the so-called “stay-at–home” stocks. Peloton, Zoom Netflix.
Businesses have to adapt to meet the demands of returning workers, travelers, and diners.
Daniil Manaenkov from the University of Michigan, an economist forecaster, said that the pandemic was essentially a preference shock. The government took action to support businesses when demand hit the ceiling, as those preferences began shifting, he said.
The cycle has begun to reverse, although without government assistance.
Manaenkov explained that the reverse shock is not being provided any help by the government. However, it still represents a preference shock. The pandemic has had the potential of being quite severe for some sectors. People who are employed in the affected sector will not be able to receive generous unemployment.
Manaenkov explained that layoffs within the tech sector could lead to a wider economic slowdown. The lack of government stimulus could cause layoffs in the tech sector, which may lead to lower discretionary spending and a larger market slowdown.
Nicaj stated that some larger tech companies are actually expanding their recruitment to other parts of the country. This could be a sign they’re still experiencing the effects of tight talent markets.
If you look at the larger economy in general, there seems to be a lot of stability for job security.
Nicaj stated, “It is probably the most secure time to retain your job now because of the tight labor market.”
Venture-backed start ups may experience slowdowns in hiring due to the “”denominator effectAccording to Mark Peter Davis (Managing Partner at Interplay, a New York-based incubator and investment firm), “
Large institutional investors who hold large amounts of both venture capital and public stock begin to see the benefits. If public stocks lose value, investors who have a large portfolio of assets will suddenly find that a larger portion of it is in venture capital. This means they need to rebalance and reduce their VC investment.
In order to improve their portfolios, institutions may start taking less venture capital funding. That can ripple through the start-up funding landscape, forcing companies to reduce their cash burns — in some cases, that means layoffs.
Martin Pichinson, co-president at Sherwood Partners is a Silicon Valley company that assists start-ups in restructuring or shutting down. His business is stable after an initial slow period that spanned between 2020 and 2021. The slow time was due to the increased availability of Paycheck Protection Program loans, which essentially allowed small businesses more runway. Since then, business has rebounded.
According to him, the success of his company is due in large part to venture capital, which relies on big bets and anticipating that many will fail. It’s even more true today. IPOs have stalledIt is now more challenging for start-ups than ever to exit the market and provide investors with a return.
Kramer said that tech’s slowdown in hiring doesn’t indicate the industry is losing its growth.
Kramer explained that Covid has impacted the growth of people over time. If they grow at 30% to 40%, and then go down to zero growth to 5%, it’s still growing. They’ve also hired many people.
Executives from two hiring platforms said that they are still seeing commitments to tech companies hiring, but that the overall approach has changed.
SmartRecruiters’ CEO Jerome Ternynck described it as a transition from “grow at any cost” to “efficient growth.”
Ternynck pointed out that although investors have stated clearly that it is now the right time for tech growth, they also recognize that there is no money to be made. slumping valuations on the public market among the tech industry. It means that tech companies will have to hire more people at a slower rate.
Hired, a sales- and tech-oriented jobs platform has seen no slowdown. CEO Josh Brenner said that it had actually received more funding from Big Tech. However, there is some uncertainty around smaller tech companies.
He stated that companies have been focusing more on long-term hiring after the 2020 pullback. The hiring process cannot be stopped. We are not surprised that there is a relative slowdown in year-over-year hiring given the amount of work companies had to do last year.
Venture investor Davis still believes there are great opportunities for start-up investment. Hard times can “starve out weak companies”, but not kill the good ones.
Davis stated, “I have been telling the LPs that it is hunting season,” This is a wonderful time to put money into work. Many great businesses were born out of recessionary periods.”