The uptick in tech layoffs have people in the industry worried. A deeper look provides lessons for all of us as we think about jobs, whatever our industry may be.
While you may know me for my work promoting career skills, I have a parallel persona as a tech CTPO (Chief Technology / Product Officer). I’ve been through the dot com crash and the Great Recession. I remember back to earlier recessions in the early 90’s and even Black Monday in 1987. Many of my peers in tech have been worried that the ground is starting to get shaky when it comes to tech employment. It is not, but the fact that there is concern illustrates an important lesson we need to remember, no matter your industry.
Let’s first consider why people are worried. Meta (parent of Facebook) laid off 11,000 people. Twitter laid off 3,800. Amazon, at the time of this writing, has said they will let go of 11,000. Stripe dropped 1,000 people and others have let go of workers as well. It sure sounds like a trend.
In fact, it’s likely a case of apophenia, or maybe availability bias. Last week (early November 2022) there were 225,000 new unemployment claims in the US, or roughly 1,000,000 per month. If you add up the layoffs across Meta, Twitter, Coinbase, Amazon, and others you get around 30,000, or 3%. In other words, if every one of these companies did their layoffs in the same month, which they did not, it makes up only 3% of the total unemployment claims. That’s it.
Now there are likely some smaller tech companies who laid off ten employees here, and five employees there. But also remember not all those headline layoffs happened in the same month, they’ve been happening since the summer. NPR notes there have been 24,000 tech layoffs this month and 120,000 this year. The 225,000 unemployment claims per week is about average for the year looking at the Dept. of Labor numbers, meaning there have been roughly 11,000,000 unemployment claims this year. The 120,000 in tech is roughly 1% of the total claims! Meanwhile tech is about 4.4% of private sector employees. In other words, these layoffs represent a small fraction at best and better than the job market as a whole. For comparison, there were 50,000 tech layoffs in the first half of 2012 alone. Statistically speaking this year hasn't been that exceptional.
The layoffs are also happening for different reasons, not purely systemic. Coinbase and other cryptocurrency companies have had a fundamental problem of the whole industry being a house of cards (but that’s a whole other discussion). Twitter just happened to do layoffs because a new owner overpaid for a historically unprofitable business and is very into cost cutting. Meta bet big on the metaverse and is now discovering the secret to success isn’t as easy as adding legs.
Some of this is, as a few tech CEOs have mentioned, because they over-hired during the pandemic. That’s probably true and the layoffs are them correcting. But just because a few marquee companies over-hired and are now having layoffs doesn’t mean that tech as an industry is in trouble. (I’d even argue if there is a recession, it already happened in 2022 and we’ll be coming out of it around Q2 2023 if not sooner, but that’s outside the scope of this article.)
It's not unlike the Shark Attack Summer of 2001 in which shark attacks dominated the news cycle despite not being a statistically significant year. In fact, there were actually slightly fewer attacks in 2001 than in 2000, but it appeared in the headlines often enough that people saw it as unusual and assumed the number was unusually high. Companies like Twitter and Facebook specifically doing large layoffs hasn’t happened much and so it makes the news, giving us a false impression of the state of the tech job market.
All of us have careers which are impacted by the economy as a whole and the trends in our industry. I’ve said many times it’s important to look at those trends. However, when looking it’s easy to be taken in by headline news and trending topics. Listening to what people say matters, because that’s what they’re thinking, but also look at the fundamentals and the raw data and see for yourself. You don’t want to make career decisions based on hearsay.
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