There are reports that within some large US companies, the number of tech layoffs is increasing. For example, Twitter is about to lay off a huge part of its advertising team. However, while many brands in the U.S. are laying off workers, others are racing to recruit staff. This is the result of wild fluctuations in consumer priorities in the three years since the epidemic. Tech giants including Meta, Amazon and Microsoft, as well as companies such as Disney and Zoom, have all announced their own layoff plans in the past few weeks. U.S.-based companies cut a total of nearly 103,000 jobs in January. This is the largest layoff since September 2020, according to a report from recruiting firm Challenger, Gray & Christmas earlier this month.
Meanwhile, other employers added 517,000 jobs last month, almost triple what analysts expect. That suggests the labour market remains tight, especially in service industries, such as restaurants and hotels, that were hit hard early in the pandemic. This situation makes it more difficult to predict the path of the US economy. Consumer spending has remained strong despite headwinds such as higher interest rates and persistent inflation, surprising some economists.
All of this is part of the “weird hangover” of the pandemic, said David Kelly, global chief strategist at JPMorgan Asset Management. The US Bureau of Labor Statistics (BLS) is already scheduled to release the next nonfarm payroll report on March 3.
Analysts and economists warn
Some analysts and economists have warned that weakness in some industries, tight household budgets, reduced savings and high-interest rates could further exacerbate employment weakness in other sectors. This will be so especially if wages can not keep pace with inflation.
The latest figures from the BLS show that wages for leisure and hospitality workers rose to $20.78 an hour in January from $19.42 a year earlier. “There’s a difference between a tight labour market and a strong labour market,” Kelly said.
Over the past few years, many employers have faced challenges in attracting and retaining workers. This includes workers’ childcare needs and potentially finding other jobs with better schedules and pay. As interest rates rise and inflation continues to run high, consumers may retrench and trigger job losses or reduce hiring needs in other booming industries.
“When you lose a job, you lose not just a job, you have a multiplier effect,” said Anetta Markowska, chief economist at Jefferies. That means that while some tech brands may have problems, this could translate into less spending on business travel. Or if unemployment rises sharply, could prompt households to sharply curtail spending on services and other goods.
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Why the massive tech layoffs
Some of the recent tech layoffs have come from brands that have stepped up staffing during the pandemic. Remote work and e-commerce are even more important to the consumer and corporate spending during the pandemic. Amazon announced last month that it would lay off 18,000 staff across the company. The Seattle-based company employed 1.54 million people at the end of last year. This is nearly double the number at the end of 2019 (before the pandemic).
Microsoft also said it would cut 10,000 jobs, about 5% of its workforce. The software giant had 221,000 employees at the end of June last year, up from 144,000 before the pandemic began. Michael Gapen, head of U.S. economics research at Bank of America Global Research, said the tech industry “was a no-nonsense industry, and it’s maturing a little bit”.
While tech companies are laying off workers, others are adding workers. Boeing, for example, plans to hire 10,000 people this year, many in manufacturing and engineering. The brand will also cut about 2,000 corporate jobs, mainly in human resources and finance, through layoffs and attrition. The increase in headcount is aimed at helping the aerospace giant ramp up the production of new planes. This is in response to a rebound in orders, which it has sold heavily to airlines such as United and Air India.
Airlines and aerospace companies, hit by travel disruptions early on in the pandemic, are now catching up on lost business. Airlines are still vying for pilots, with a shortage of the job constraining capacity. However, some consumer demand for services such as travel and dining is surging.
Other businesses, large and small, must also raise wages to attract and retain workers. Industries not favoured by consumers and other businesses, such as restaurants and aerospace, are rebuilding their workforces after layoffs. Walmart said it would raise the minimum wage for store workers to $14 an hour to attract and retain workers. Cassidy Smith, general manager of the Miner’s Hotel in Butte, Montana, said the company has increased its butlers’ hourly wages by $1.50 to $12.50 over the past six weeks because of high attrition rates.
Airports and concessionaires are also scrambling to hire staff as the travel industry gets hot again. Phoenix Sky Harbor International Airport holds monthly job fairs and offers childcare scholarships to some workers to better its recruiting efforts.
Austin-Bergstrom International Airport, which saw a 48 per cent increase in the number of flights by seat this quarter compared to the same period in 2019, has introduced a series of initiatives to attract more staff. It now has a $1,000 referral bonus and offers signing and retention incentives to referred staff. The airport also raised hourly wages for airport facility representatives from $16.47 in 2022 to $20.68 in 2023. “Austin is expensive to live in,” said Kevin Russell, the airport’s associate director of talent, who said the airport’s employee retention rate has improved since implementing the measures.