Technological layoffs, the slowdown in hiring stand out in the hot job market

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WE Employers added more jobs than expected in April in a tense job market, the Bureau of Labor Statistics reported Friday.

But the tech sector, which boomed during the pandemic, is showing signs of shrinking.

Facebook parent company A half stop hiring and curtail some hiring plans, Privileged relationships last week based on an internal memo he had displayed. “We regularly evaluate our talent pipeline based on our business needs and in light of the expense guidance provided for this earnings period, we are slowing growth as a result,” a spokesperson at CNBC confirmed.

by Amazon The CFO told analysts about the company earnings call that its warehouses have become “Short-staffed“, following a large wave of hiring during the widespread lockdown that drove more and more consumers to shop online.

It’s not just the biggest tech companies.

Uber CEO employees told in a message obtained by CNBC that the company would “treat hiring as a privilege and consider when and where to add staff,” adding, “We’ll be even more cost-conscious across the board.”

retail brokerage Robin Hood recently said it is cut about 9% of full-time employees to eliminate overlapping job functions after a large wave of hiring. group announced earlier this year it would be reduce their corporate workforce by around 20% as part of a cost-cutting measure. And startups like the celebrity video Cameo app recently announced a series of layoffs for about a quarter of its staff. The first information reported.

The cuts are in stark contrast to the rest of the economy, where job seekers still have significant bargaining power and employers grapple with rising labor costs due to inflation and a wave of resignations. In April, employment growth in leisure and hospitality led the way, at 78,000, signaling that demand is returning for prepandemic businesses.

According to experts, the weighting factors on the tech industry are unique to an industry that grew at a rapid pace during the pandemic and do not necessarily indicate a broader slowdown. While some of the pressure may also come from macroeconomic trends that may then manifest in other sectors, many economists expect the tight labor market to be here for a while thanks to the aging of the U.S. population and other factors.

Inflation and other macro factors

Trends in the tech industry can be difficult to track in job data due to the very different business models within the industry, from Amazon warehouse to Facebook advertising. But looking at the information sector reported by the Bureau of Labor Statistics, Veneta Dimitrova, a senior US economist at Ned Davis Research, said, “There does not appear to be any major trend from that sector for overall employment growth.”

That said, inflation could be a factor in hiring technology, just as it is affecting other sectors of the economy.

Terry Kramer, an adjunct professor at UCLA’s School of Management, said a company like Amazon is a backbone.

Inflation is 8%, economic growth is now starting to slow, people just don’t buy as much, “Kramer said.” And so, for me, it’s Amazon’s story more, where on e-commerce, their main platform, the people are just more cautious about what they buy. Because based on inflation, there are fewer dollars available for consumers to spend. “

For a company like Amazon, inflation means that the company’s costs will rise. “If the consumption of their products and services doesn’t increase that much, it could hurt their margins,” explained Agron Nicaj, associate economist at The Conference Board. “So they are forced to slow down their growth.”

But other companies’ slowdowns may be more specific to their businesses. For example, Kramer partly attributed Meta’s hiring freeze AppleiPhone privacy changes, which damage Meta’s ability to target ads.

Post pandemic snapback

The technology sector was a major beneficiary of behavioral changes at the height of the pandemic. As offices closed and people spent more time at home, investors flocked to so-called home stocks such as group, Enlarge Other Netflix.

As people are returning to the office, traveling and eating out, many of these businesses have had to readjust.

“When the pandemic hit, it was basically a shock of preference,” said Daniil Manaenkov, a University of Michigan economic meteorologist. As those preferences changed, he added, the government stepped in to help companies where demand suddenly hit the wall.

Now the cycle is reversing, but without government help.

“Now that we are going through the reverse shock, there is no help from the government, but it is still a preferential shock,” Manaenkov said. “So it has the potential to be a little painful for the industry that benefited from the pandemic. But also for the people who have been employed there because they won’t have generous unemployment.”

If layoffs in the tech sector become more common, it could impact the entire economy at large, Manaenkov said. Without government stimulus, fired tech workers could reduce their discretionary spending, which could contribute to a broader market slowdown.

But some large tech companies have actually expanded their hires in different parts of the country, which could indicate that they too are still suffering from the impact of the tight talent market, Nicaj said.

Moving on to the broader economy, job security for workers appears to be fairly stable for now.

“It’s probably the safest time to keep your job right now because the job market is so tight,” said Nicaj.

Rebalancing of the VC portfolio

Slowdowns in hiring among venture-backed start-ups could be the result of the so-called “denominator effect“, according to Mark Peter Davis, managing partner of New York-based investment firm and incubator Interplay.

Start with large institutional investors who hold a mix of assets, including government and venture capital. If the value of publicly traded shares falls significantly, those investors will suddenly find themselves with a relatively larger percentage of their portfolio in venture capital and will have to rebalance by holding back new VC investments.

As a result, institutional investors could start withdrawing venture capital funding to rebalance their portfolios. This can ripple in the start-up financing landscape, forcing companies to reduce their money consumption – in some cases, that means layoffs.

Martin Pichinson is the co-president of Sherwood Partners, a Silicon Valley firm that helps restructure or liquidate start-ups. He said his business has remained fairly consistent after a briefly slower period spanning parts of 2020 and 2021. He attributes that slower period to the proliferation of government salary protection program loans that essentially gave some small you take an extra lead. But since then, he has seen the business grow again.

He said the consistency of his business is largely due to the venture capital model, which is based on making big bets, anticipating that many will eventually fail. This is especially true now that IPOs have stalledmaking it harder for start-ups to go out and offer investors a return on their money.

From hypergrowth to efficient growth

Kramer noted that a slowdown in hiring in the tech sector doesn’t mean the industry has stopped growing.

“People have to look at how much they have grown in the last, two, three, four years because of Covid,” Kramer said. “If they grow to 30, 40% and then drop from zero to 5% growth, they are still growing and have already hired so many people.”

Two executives from the hiring platform said they still see a commitment to hiring from tech companies, but the overall approach has changed.

Jerome Ternynck, CEO of talent acquisition platform SmartRecruiters, called the shift from “growing at all costs to efficient growth”.

“Investors have clearly expressed that this is the time for technology to continue growing, but that money is no longer free,” said Ternynck, pointing to declining valuations on the public market in the technology sector. “It translates to a slower pace of additional hires for technology companies.”

Hired, a tech-focused and sales-focused jobs platform, hasn’t seen a slowdown yet and has actually seen more investment in hiring by Big Tech, according to CEO Josh Brenner, although it does foresee some volatility around small tech firms. .

“From what we have seen, companies are focusing on the long haul for hiring, having learned from the retirement in 2020,” he said in a statement. “Turning off the hiring pipeline isn’t worth it. Given how much companies have had to recover for the past year, we’re not surprised to see a relative slowdown year-over-year.”

Davis, the venture capitalist, still sees great opportunities in investing in start-ups, as tough times “starve weak companies” without killing strong ones.

“I told the LPs we talk to that this is actually hunting season,” Davis said. “This is a great time to invest money in work. And many great companies have been created since the last few rounds of recession.”

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