- The layoffs of Elon Musk and Mark Zuckerberg have some worried that more companies will follow suit.
- Tech experts told Insider it’s unlikely to happen given the rigidity of the job market.
- But a recession will increase unemployment and it may take longer to find a new job.
The layoffs returned to the front page when Elon Musk and Mark Zuckerberg wield the ax on Twitter and Meta, respectively.
Nearly 15,000 workers from the two companies lost their jobs this month, with Salesforce and Lyft also cutting their roles.
While some are understandably concerned that more layoffs are around the corner, especially as the odds of a recession rise, there are reasons to remain optimistic.
Industry pundits told Insider that most employers simply can’t afford to lay off large swaths of workers if they want to get out on the other side. However, unemployment may rise and you may be getting less from your employer than before.
Huge economic headwinds, but a tense job market
Layoffs among big tech companies may be due to their context, but they have also come in the shadow of an increasingly bearish economic climate.
High inflation for decades has increased costs for businesses, which also face higher financing costs as interest rates rise. Big tech is signaling a significant slowdown in digital advertising revenue, one of the main signs the economy could falter.
Yet the macroeconomic picture remains complicated. Insiders reported that the “growth-recession” forecast for 2023 will have a relatively favorable effect on the job market.
And while the Bank of America predicts that unemployment in the United States will rise to 6.5%, it would still be much lower than the double-digit unemployment rates seen in the past two recessions.
Daniel Zhao, chief economist at Glassdoor, told Insider that the recent tech layoffs alone weren’t enough to shift the unemployment figure yet, but they were something of a signal nonetheless. “If the economy contracts or slows further, it is reasonable to assume that the labor market will slow further as a result,” he said.
However, employees are still laying off at relatively high rates, with 4.1 million Americans quitting their jobs in September. Industry pundits have said there’s a reason employers aren’t jumping the gun on layoffs as the economy slows.
Your employer probably wants to hold on to you
Ravin Jesuthasan, a global transformation leader at wealth management firm Mercer, told Insider that even as costs rise for employers, layoffs simply aren’t an option for many companies.
“I don’t think the companies overtook their skis in rental because it was so hard to find talent,” he said.
Most CEOs have plans to reduce hiring in 2023, but at the same time, half said they have increased their hiring budgets, Jesuthasan said.
“Overall we will probably see a reduction in strength, but we are still very short of some of the critical skills,” he said.
The labor force participation rate – the share of people working or looking for work – was 62.2% in October, 1.2% lower than the January 2020 rate.
Nick South, chief executive of the Boston Consulting Group, told Insider that this means employers are still struggling to find enough high-caliber talent.
“They are really aware of how difficult it has been to attract and keep people, so they are really aware of how to keep those people with a really compelling value proposition,” he said.
Add to that a severe skills shortage, South said, and employees are likely to have much better bargaining positions than in previous recessions.
The choice may run out
What could end, however, are the “Grand Resignations,” a pandemic-driven period characterized by high demand for employees, with little supply. That’s because talking about recession and falling vacancies will keep employees in office longer, Jesuthasan said.
Stephan Meier, a professor at Columbia University, told Insider that it will be harder to find work and that employees may not be as comfortable finding a new role for long.
“Before joking about going to the beach or going skiing for a month, and then getting another job with a better package. I think it will change for the time we are in this recession,” he said.
There are some signs that employers are getting bolder. A recent Glassdoor study found employee ghosting has tripled since 2019. Zhao said companies can invest less in candidate experience when the job market is less rigid.
However, Meier said employees are ultimately likely to still enjoy benefits that weren’t before the pandemic, with Zhao calling it structural change built to last.
“I think those employers who take this recession and say ‘Oh, let’s go back to power and treat our employees badly,’ aren’t going to be the ones that are going to be successful,” Meier said.