Technology industry

Tech industry slashes workforce as U.S. job market remains strong


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Two recent titles have done their job on me. They have increased my level of economic anxiety, which is already on my nerves.

About 10 days ago the Wall Street Journal published an article stating “More and more companies are starting to cancel job offers.” He detailed how several companies called back new hires to tell them their jobs had been cut even before day one.

Several of the companies, such as real estate firm Redfin and cryptocurrency exchange Coinbase Global, saw huge growth during the pandemic shutdowns. Employees laid off before they even started were mostly early career workers and young people.

Last week, an NPR headline read: “The job cuts are coming. Here’s who’s hurting the most so far.” It started with this: “The dominoes are starting to fall in the American economy.” The report mentions job cuts and hiring freezes at Tesla, JP Morgan and Netflix, and highlights how the wave of payroll cuts has been concentrated among technology and real estate companies that have benefited from the first months of the crisis. COVID-19 pandemic. (By the way, what the other “dominoes” of the economy are has remained a mystery.)

For the casual reader or someone who scrolls through their social media newsfeed, these headlines would be concerning. Are these early job cuts the proverbial canaries in the coal mine for a wider and deeper economic downturn? In the twisted logic of investment markets, such early signs of labor market weakness can be welcomed.

That’s because the strength in the job market allows the Federal Reserve to continue its aggressive interest rate hikes to fight inflation. If these sporadic, industry-specific job cuts increase, it would put the central bank on notice to slow or end its rate hikes.

But the data tells a different story. Yes, job cuts in the tech industry increased significantly in May, according to outplacement firm Challenger Gray and Christmas. Yet the total number of job cuts announced across all industries has fallen to less than 21,000. This in a labor market of more than 150 million workers. Companies announced fewer job cuts this spring than in the months before the pandemic.

June employment data will be released on Friday. Monthly job growth has slowed, but remains historically healthy with more than 300,000 new jobs created each month. Payroll provider UKG found more work activity through mid-June than a month earlier, suggesting continued strength and not a weakening in demand for workers.

Emotion dominates the day in volatile markets. But strong data drives long-term economic results.

Tom Hudson hosts “The Sunshine Economy” on WLRN-FM, where he is vice president of news. Twitter: @HudsonsView