COMP NEWS – Companies everywhere are posting large profits. The U.S. labor market shows signs of increasing resilience. Unemployment remains below 4%. So why are so many companies laying off staff?
The U.S. labor market has been called “hot” and “surprisingly resilient” in recent weeks, but several companies have still announced substantial job cuts.
Some of the biggest names in tech — Microsoft, Google, Meta and Salesforce — have all slashed jobs recently. Other major corporations like UPS and Citigroup are also cutting thousands of positions.
Those headlines have sparked concerns among American workers, with discussions of “layoffs” up 27% year-over-year on the employee review website Glassdoor.
But so far, the heightened concern isn’t reflected in the underlying data. In December, there were 1.6 million layoffs, according to the Bureau of Labor Statistics (BLS). That number is slightly higher than the 1.5 million who were let go in December 2022, but at 3.7%, the unemployment rate is still near a 50-year low.
The tech sector has been victimized by sweeping layoffs and restructures. While some workers speculate about the role of AI in these eliminations, less than 1% of surveyed companies responded that AI played a role in recent layoffs.
The job cuts in the tech sector come after a wave of hiring in recent years as companies bulked up in anticipation of what the future held. Now, with more information, many are recalibrating.
“They’re starting to grapple with the fact that some of those pandemic-era trends that they bet on, didn’t end up playing out,” said Zhao.
The arrival of new, powerful artificial intelligence tools could further disrupt tech jobs, but for now, Bunker agreed that over-aggressive hiring is the more likely explanation for the recent cutbacks.
Today, job postings in software development are roughly a third of what they were in March 2022, according to Indeed data. Media and communications postings have also plummeted.
In January, “restructuring” was the most-cited reason for job cuts across all sectors, while AI was blamed for a tiny fraction of them (less than 1%), according to the Challenger, Gray & Christmas report.
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