Broker Check

Why Tech’s Layoffs May Not Be as Scary as You Think

January 09, 2023
Share |

Some of the biggest headlines we saw in 2022 and will continue to see in 2023 are centered around layoffs. Specifically, tech company layoffs. We have seen countless stories about companies like Apple, Amazon, Meta, Google, Twitter, and more all laying off employees. Headlines like these can spark some fear and panic. However, these may not be as scary as you think and here’s why. 

First, we have to talk about how tech got to this point. The morale of the story, too much growth, too fast. It feels weird saying that about any company, but here it is true. Throughout 2020 and 2021, tech experienced an explosion of growth. The pandemic pushed all of us online more and more because we had nothing else to do. Due to this, tech companies were experiencing massive amounts of growth. This growth showed that tech companies were not prepared well enough for a massive influx in traffic and business. It also showed that this massive influx in business was providing them with much bigger profits quarterly. So, with brand new cash in their pockets, tech started hiring massive amounts of new employees to be able to handle their increase in business so that they could provide the best product or service to customers and in turn keep the growth going. 

That was all until 2022. 

As fast as tech grew in 2020 and 2021, it stopped just as quickly in 2022. Inflation ticked up to 7-9% and the Fed started increasing interest rates. Life continued as it once was with less people online all the time and others started tightening their budgets due to the inflation. So in essence, the complete opposite of what tech experienced when growing. This is when we started seeing tech take steps towards cost cutting, preparing for a world with less growth for the time being. As a result of that, tech has implemented layoffs to lessen their employee headcount in an effort to cut cost and save money where they can. These are the headlines we are seeing. When profits and growth are not what they once were, companies tend to cut costs and unfortunately layoffs are one of their ways of doing so. 

So what does this mean for the overall labor market? 

The tech layoffs have very little impact on the overall labor market. While tech companies have laid off over 140,000 employees, the labor market added 223,000 jobs overall just in December of 2022. What we are seeing is the companies who over-hired are starting to dial that back, but the overall labor market is showing more demand for workers as consumers have remained strong in spending on goods and services. 

Ultimately, the noise is loud because tech companies make headlines being that they are some of the biggest companies in the world. But it doesn’t tell the whole story about what is happening in the labor market. The headlines aren’t as scary once you look around and see that outside that one specific sector, the labor market is strong.