We’re less than a month into 2023, and headlines about layoffs keep popping up.
After being hit hardest in 2022, the momentum has carried over into the tech sector’s New Year. The total of 97,171 jobs in 2022 was the highest number of announced total job cuts in the tech industry since 2002, according to global outplacement firm Challenger, Gray & Christmas.
In the first 20 days of January alone, the tech sector announced more than 31,000 job cuts. This includes his 10,000 job cuts at tech giant Microsoft and a whopping 12,000 job cuts at Alphabet. Not to mention Alphabet, Spotify and Salesofrce. Also, according to Challenger, between November and January 20, the tech sector announced his 100,114 job cuts.
The tech industry enjoyed the longest bull market in history, and low interest rates created the perfect environment for growth. Picture-perfect economic conditions have allowed us to generate high profits and bloat our workforce at megacap technology companies for 11 years.
However, the economic environment has darkened over the past year as the Federal Reserve has begun to raise short-term interest rates rapidly, causing borrowing costs to skyrocket. Its impact was felt across all industries. The days of big tech free money are long gone.
Technology feeling the pressure, like other sectors, has decided to cut costs to focus on a healthy balance sheet. Unfortunately for employees, layoffs and the sale of office space are some of the first measures taken, which is why we see the biggest spike in layoffs during recessions.
Meanwhile, in the media sector, the group has held up relatively well compared to technology, despite constant layoff headlines. The media division said that in 2022 he announced 3,774 job cuts, a 5% drop from the previous year. However, according to Challenger, there has been news in the media that job cuts have jumped by 20% from 2021 onwards.
The media layoffs can be attributed to several key factors, including recent M&A, macroeconomic headwinds, a broader shift from linear to streaming across the industry, and a downturn in advertising.
As is often the case during economic downturns, advertising is usually the first pain point. That’s how it unfolds in 2022, and the industry’s troubles continue through 2023.
These ad problems extend to digital media sites such as Vox, Vice, and Buzzfeed. These sites have found it very difficult to keep staff and continue to generate revenue, so editorial jobs have been cut. Additionally, companies like Vice are still looking for buyers as digital news players look to integrate more.
Unemployment of skilled white-collar workers is not an accurate picture of the overall US labor market, despite soaring headlines of terrifying high-profile layoffs.
In December, the US economy created 223,000 jobs and the unemployment rate fell to 3.5%. The labor market is tight and employers are still struggling to find qualified and skilled workers to fill vacant positions. That’s why most tech and media workers find new jobs quickly after being laid off.
Still, layoff announcements are likely to continue until the Fed slows its pace of rate hikes this year. With the fourth quarter earnings season in full swing in the coming weeks, investors should have a better sense of how the media and technology landscape is progressing. Details about how companies forecast their financials in 2023 and how cost-cutting measures have impacted those forecasts are important in determining the outlook for the sector.