Big Tech layoffs are a dystopian job market fiction

NEW YORK, Nov. 18 (Reuters Breakingviews) – Job cuts at tech giants including Twitter, Amazon (AMZN.O) and Meta Platform (META.O) are the first major job cuts since early 2020. Given the U.S. unemployment rate, Silicon Valley may seem to herald the beginning of a dystopian future for workers. Still, it’s entirely possible that what’s happening in Silicon Valley won’t spill over to the rest of the economy.

Tech companies started hiring quickly a few years ago. After the pandemic hit in 2020, it took four months for employment in what government statistics call the rest of the information sector to return to pre-Covid levels. By comparison, overall employment recovered for 29 months. did not do it.

Silicon Valley is also ahead of the curve when it comes to layoffs. Rising interest rates will make capital more expensive and force companies to cut spending on future projects. This is especially burdensome for technology companies that rely heavily on innovation to drive growth. Elon Musk cut her Twitter workforce in half in November to keep costs down. Employment dropped further afterward as disappointing workers resigned.

Elsewhere, companies are still hiring. In September, there were roughly two job openings for every available worker. Job listings for restaurant workers have increased 38% from pre-crisis levels on Nov. 10, according to Indeed. Hospitality and tourism listings are 15% higher than before.

Could Silicon Valley pain spread? It depends on the Federal Reserve to cut inflation, excluding food and energy prices, from 6.3% annually to a target of 2%. Officials warned in September that the battle was likely to result in layoffs and delays in hiring. The Federal Reserve’s projections suggest that the unemployment rate will reach 4.4% in 2024, putting about 1.2 million people out of work.

However, inflation appears to have peaked in June. Fed President Christopher Waller suggested on Wednesday that such a trade-off could be avoided. This brings hope that it’s a technology-specific adjustment rather than a white-collar recession. But Silicon Valley’s modest culling suggests that the worst could happen.

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(Author is a Breakingviews columnist for Reuters. Opinions expressed are his own.)

contextual news

Amazon.com, Twitter, Meta Platforms and other tech companies have laid off tens of thousands of employees in recent weeks as leaders try to cut costs and prepare for slowing growth.

The Federal Reserve has warned that higher interest rates could lead to higher unemployment. Fed Chairman Jerome Powell has repeatedly emphasized high job openings as a sign that the labor market is imbalanced.

Inflation data released on November 10 showed a 7.7% rise in the year to October. This is down from his 8.2% pace the previous month.

Editing by John Foley and Sharon Lam

Our standards: Thomson Reuters Trust Principles.

Opinions expressed are those of the author. They do not reflect Reuters News’ commitment to integrity, independence and freedom from bias under its Trust Principles.

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