Are tech layoffs the canary in the US job market?

The tech industry is laying off workers at an alarming pace as it prepares for a possible recession, sparking widespread concerns job loss It could spill over into the broader US economy.

Although it is still solid job growth and high wages in many industries, big tech companies are clamping down amid a bleak economic outlook for the industry.

Alphabet Inc. Google’s parent company is the latest tech company to shrink its workforce, and on Friday announced it It plans to cut 12,000 jobs, or about 6% of its workforce. It marks one of the largest rounds of layoffs ever for the company and adds to the tens of thousands of job cuts already announced by Microsoft, Amazon, Twitter, Salesforce and Facebook parent company Meta.

Technology companies have already cut more than 190,000 jobs since the start of 2022, according to layoffs.fyi, a website that tracks job cuts in the industry. Experts say the job losses are likely an indication of future layoffs across a range of industries within the labor market.

MICROSOFT CUT 10,000 WORKERS AS A MOUNTAIN TECH LAYOFFS

Google logo

Workers set up a Google screen ahead of CES 2023, the world’s largest annual consumer electronics show, January 3, 2023 at the Las Vegas Convention Center in Las Vegas, Nevada. ((Photo by Robin Beck/AFP via Getty Images)/Getty Images)

“This is a harbinger of what’s going to happen later this year across the economy,” Joe Brusolas, chief economist at RSM, told FOX Business.

Prosolas said layoffs in tech are the result of a phenomenon known as “labor hoarding.” With the unemployment rate near its lowest level in half a century and demand for workers skyrocketing, many companies — particularly those in the technology sector — have avoided laying off employees at all costs.

This is evident in the number of jobs available in the economy: the government reported earlier this month that there are about 10.46 million jobs At the end of November, it was the 13th consecutive month that the opening exceeded 10 million. Before the pandemic began in February 2020, the highest recorded level was 7.7 million.

but with The Federal Reserve raised interest rates Higher, moderate inflation rates and slowing consumer spending, tech companies are sizing right and trying to correct over-hiring during the COVID-19 pandemic.

The alphabet unit cuts over 200 functions

“In terms of technology, this is just a corollary of several years of labor hoarding and adjustments to a new era of high interest rates and the end of easy money,” Brosolas said. He predicted that there would be layoffs across the real economy as more sectors adjust to the post-pandemic era as well as “demand easing and moderate inflation.”

Although the job market remains healthy and one of the few bright spots in the economy, there are signs that it is beginning to give way in the face of rising interest rates. The economy added just 223,000 jobs in December, the smallest gain in two years.

The loss of high-profile jobs in the tech world may be unique to the sector’s explosive growth during the pandemic and subsequent normalization, but it may also be a sign that future layoffs are coming, according to Allie Kelly, chief marketing officer of Employ Inc. A provider of real-time employment data.

US job growth cools slightly in December as the economy adds 223,000 new jobs

“Because the world does not exist in a vacuum, they are definitely indications of additional layoffs in the future,” Kelly told FOX Business. “Does that now mean we’re going to see the kind of mass layoffs that have been in the headlines lately? Not necessarily. But it’s hard to ignore the evidence supporting that there are more mass layoffs that industries will encounter.”

The December jobs report contained some worrying signs about the strength of the labor market, including the fifth consecutive monthly decline in the number of temporary workers and the second month in a row of a decrease in overtime for employees. These are often the places companies first tighten their belts, Kelly said.

Federal Reserve Chairman Jerome Powell at the podium

Federal Reserve Chairman Jerome Powell speaks during a press conference Wednesday, December 14, 2022 at the Federal Reserve Building in Washington. (AP Photo/Jacquelyn Martin/AP Newsroom)

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Federal Reserve officials They made it clear that they expect unemployment to rise as a result of higher rates, which could force consumers and businesses to cut back on spending. Updated projections from the December central bank meeting show that officials expect unemployment to rise to 4.5% by the end of next year, up from the current rate of 3.5%.

This could mean that more than 1 million Americans will lose their jobs between now and the end of 2023.

“Ultimately, the other thing to keep in mind,” Kelly said, “is that the Fed doesn’t really care about people keeping their jobs.” “For them, this is a means to an end, and what they are trying to do is achieve price stability without worrying about people’s jobs.”

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