Layoffs of tech giants are a dystopian fantasy for the job market



NEW YORK (Reuters) – Layoffs at tech giants including Twitter, and Meta Platforms mark the first large-scale job cuts since early 2020. After years of low unemployment in the United States, Silicon Valley may seem to herald a start. for a miserable future for workers. However, there is a good chance that what is happening in Silicon Valley will not spill over into the rest of the economy.

Tech companies were quick to hire a couple of years ago. After the pandemic hit in 2020, it took four months for employment in what government statistics call the “other information” sector to get back to a pre-Covid level. By comparison, public employment has not recovered for 29 months.

Silicon Valley is ahead of the curve in shooting, too. Higher interest rates make capital more expensive, forcing companies to cut back on spending on future projects. This is particularly stressful for tech companies that rely heavily on innovation to drive growth. Elon Musk cut Twitter’s headcount in half in November to curb costs. Since then, employment has fallen further as discouraged workers quit.

Elsewhere, companies are still recruiting. There were approximately two job vacancies per worker available in September. Job listings for restaurant workers are up 38% from pre-crisis levels as of November 10, according to Indeed. Hospitality and Tourism listings are 15% higher than they used to be.

Could the pain of Silicon Valley be spreading? That depends on the Fed, which has a mandate to lower inflation from an annual rate of 6.3%, excluding food and energy prices, to its target of 2%. Officials warned in September that the fighting would likely lead to layoffs and a slowdown in hiring. The Fed’s forecast expects unemployment to reach 4.4% in 2024, indicating that approximately 1.2 million people are out of work.

However, inflation appears to have peaked in June. Federal Reserve Governor Christopher Waller suggested on Wednesday that such a trade-off might be avoidable. This gives rise to hope that what is coming is not even a white-collar recession, but a technology adjustment. This is no great consolation to the workers who return their door badges. But she does suggest that Silicon Valley’s modest execution may be as bad as it gets.

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context news, Twitter, Meta Platforms and other tech companies have collectively laid off tens of thousands of employees in recent weeks as leaders look to cut costs and prepare for slower growth.

The Fed warned that higher interest rates could lead to higher unemployment. Fed Chair Jerome Powell has repeatedly emphasized rising job prospects as a sign that the job market is out of balance.

Inflation data published on November 10 showed that prices rose 7.7% in the year through October. This is down from the previous month’s pace of 8.2%.

(Editing by John Foley and Sharon Lamm)

The views and opinions expressed herein are those of the author and do not necessarily reflect the views and opinions of Nasdaq, Inc.

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