By Jeff Elder
Examiner staff writer
I saw the phrase “bloodbath” in the headline of a story on tech layoffs recently and heard a high-growth investor predict that millions of tech workers could be laid off.
Being the first to predict the worst becomes a competition when things go badly in tech. Things are going badly.
Many tech stocks have plunged, and some crypto prices have cratered. Some tech companies are laying people off, and layoffs are scary. If it happens to you, it can be emotionally devastating (been there), yet survivable.
But the solution is not to excessively worry about it happening to you. That’s really hard when you’re in an echo chamber designed to worry you.
Instead of repeating the same news about some companies’ layoffs with a snippet of dire prognostication, let’s hear from someone who’s actually qualified to analyze tech layoffs:
“Don’t panic yet.”
That’s AnnElizabeth Konkel, an economist at the job-listing company Indeed’s Hiring Lab. She analyzes economic research and data science to spot U.S. labor market trends during good times and bad. You’ve heard the hot takes. Take a minute to absorb her cool take.
As of May 6, software development job postings on Indeed are 123% above their pre-pandemic baseline. “They have kind of flattened out since mid-January,” Konkel says. “But the idea that we’re seeing software development job postings take a substantial dive is just not the case. That’s just not true.
“It’s something that I’m going to definitely be watching, but there’s not an indication that this is some sort of tidal wave that’s coming.”
If widespread layoffs do happen, there is an upside: A job market that is still, overall, robust.
“For the workers that have experienced layoffs, a bit of a silver lining is that it is a very tight labor market. So hopefully they’re able to transition to another job quicker than they would be able to in the past. Workers still have plenty of options to be able to transition to a new company and potentially negotiate for remote work or a higher compensation package.”
That doesn’t mean things won’t get worse. They might. But that is the data-based analysis of someone who looks at the labor market for a living. It’s context, which is important.
Here’s another expert’s cool take:
“Some companies got over their skis with hiring, but there’s still a massive shortage of talent. There is some pain ahead. There will be some constrained resources. But engineering talent will still have multiple choices of where to work.”
That’s from Dan Ives, a tech industry analyst at Wedbush Securities, and he makes a really important point about some companies hiring too fast in the past.
Many tech layoff stories point to Robinhood, the Menlo Park fintech that laid off 9% of its workforce in April. But Robinhood is not representative of the overall tech workforce. It hired much too fast, as the company admits.
Robinhood CEO Vlad Tenev said in announcing the layoffs that “rapid headcount growth has led to some duplicate roles and job functions.” How rapid? Robinhood grew its workforce 85% in less than a year, from 2,100 reported in its July 2021 SEC filing to 3,800 today. That’s hiring roughly 11 people a day.
Does it really surprise anyone that a young company that has had its issues grew that fast and had to walk it back?
Here’s yet another expert’s cool take:
“The mix of the top 25 employers in the combined San Francisco and San Jose metro areas … highlights a common scenario with technology companies that are simultaneously hiring workers in emerging technology or strategic growth areas, while transitioning or reducing workers in mature product areas.
“There are undoubtedly a number (of) concerning economic headwinds that could stall growth, including the catchall ‘uncertainty factor’ that tends to put companies in wait-and-see mode with investment and hiring. The challenge is always in interpreting specific examples of a company reporting weak earnings or hiring slowdowns with the net effect across all technology companies and hiring.”
That’s not sexy, but if you pay attention, it’s very insightful. What Tim Herbert, CompTIA’s chief research officer, says there is that tech companies are laying people off, but they are also hiring people. And while hiring and firing is hell on a staff, it’s also not catastrophic for a workforce. But the second thing Herbert says is even better. You can’t see the big picture in the specific company actions. Layoffs don’t “sweep across” an industry, even a copycat industry like tech. Unless a trend is stoked by fear that spooks investors and stockholders.
And again, CompTIA’s view is not a naive or rosy outlook. But it also isn’t breathless storm-chasing.
There are layoffs happening, and layoffs are hard. But the nation added 428,000 jobs in April, and the tech jobs market is still very strong. There is bad inflation right now, and that can be a harbinger of recession, and that, too, is concerning. But on Wednesday, the Labor Department also reported that inflation slowed in April for the first time since August. You might have missed that headline because of reports of tech stocks plummeting. They did. But there are also real market forces at play there.
Cryptocurrency and Web3 have been a Wild West full of ripoffs for several years. Even some of the big tech stocks that have been hit hard – like Apple, Netflix and Meta – were heavily tied up in innovation that doesn’t yet have a solid market.
It’s sad and scary when people lose jobs and money. But it’s not a mysterious disaster that strikes anyone unsuspecting and for no reason. Here’s someone else who knows what they’re talking about:
“Human nature thrives on Greed and Fear. Fear will be what is driving much of what we see and read. Remember that opinions are not facts, and literally, no one out there can predict the future.”
That’s a tweet from from Josh Schultz, president of Canekast, a network of foundries based in Austin, who teaches finance classes at Syracuse. He told me he learned the hard way to avoid media writing about market crashes and layoffs.
He makes a valid point.