Amazon is laying off over 18,000 employees. Salesforce is cutting his 8,000 and Twitter is cutting thousands more.
While the hardships of those facing unexpected layoffs should never be taken lightly, these announcements by major tech companies are no mass tragedy for the American economy. The very bad news is that the economy will slow significantly and there will be far more layoffs by companies large and small in various sectors.
Losing a job can be traumatic for workers, but large-scale layoffs in the tech industry, especially due to long-serving jobs, can lead to 160 million workers in the United States. The reality is that it is only a small temporary event in the labor market. In a labor market as strong as it is now, on average he has nearly 1.4 million workers laid off or laid off each month. In addition, he has 4 million people voluntarily quit their jobs. With more than 6 million workers employed each month, most of those who have lost their jobs can rely on a relatively short period of unemployment.
This is consistent with data on how long workers are unemployed. A typical unemployment period was less than nine weeks, according to the latest report in December.
While being out of work for nine weeks can still be a serious challenge, recently laid-off workers are eligible for unemployment benefits worth about 40% of their wages in most states. High-paid workers, including most of the tech sector workers facing them, are also likely to have savings to survive prolonged unemployment.
Also, workers laid off by tech giants are more likely to be rehired sooner than those in other sectors.The information industry unemployment rate was just 2.2% in December, compared with 3.5% overall. % was.
But if the economy slows and layoffs spread to other industries and company sizes, it could address the recession risks many economists fear as a result of the Federal Reserve’s rate hikes. These are specifically designed to slow the economy and reduce jobs. The reason was that the economy was seeing too much demand, which was pushing up wages and prices.
Rate hikes are aimed at reducing demand for homes, cars and other items. This will result in fewer jobs in the most affected industries, less bargaining power for workers, less wage growth, and less upward pressure on costs and prices.
If this move to slow the economy goes too far, we will see a very different picture regarding the prospects for layoffs, layoffs and rehiring workers. In today’s robust labor market, he outnumbers layoffs by nearly 3 to 1. During the Great Recession of 2009, the number of people laid off was about 20% higher than the number of people leaving their jobs each month.
It is understandable that few people wanted to quit their jobs during the Great Recession. The prospects of finding a new job were not very good. By early 2010, the typical length of unemployment had grown to almost 20 weeks. Moreover, many workers ended their periods of unemployment by simply giving up looking for work rather than getting one. This has been a terrible time for those who are seriously concerned about losing their jobs, with tens of millions of workers unemployed for a long period of time.
That’s a stark contrast to the current labor market, where unemployment is at its lowest level in more than half a century, but economists fear the Fed’s interest rate hikes will go too far and lead to another recession. The Fed is right to try to slow inflation that has gotten out of hand in late 2021 and early 2022. In particular, the housing market saw double-digit inflation.
The rate hikes have successfully reversed the situation in the housing market and house prices have stopped rising and are now falling in many parts of the country. The supply chain problems that led to significant price increases early in the recovery have all but disappeared, and prices for things like electronics and furniture are now falling.
This is a huge success story for the Fed. But if we raise interest rates too high and trigger another recession, reports of massive layoffs in tech and other sectors would be much worse news than they are now.
Dean Baker is a senior economist at the Center for Economic and Policy Research. He is the author of several books, including Rigged: How the Globalization and the Rules of the Modern Economy Were Structured to Make the Richer Richer.