The current economy is shifting uncertainly from a host of different sources. Recessionary pressures from the Fed through their interest rate hikes and huge tech layoffs combined with still strong unemployment figures paint an interesting picture. Many feel that a recession is inevitable, but when and how hard it will be are hot topics of debate.
All of this unquestionably affects the labor market and whether companies are looking to hire. Below, we discuss the current tech economy and hiring patterns in depth.
The Tech Economy
2022 saw an extreme four-consecutive 75 basis point rate hikes by the Fed. This was in response to severe inflation caused largely by consumer spending post-COVID and fiscal stimulus being pumped into the economy.
This partially spurred many tech firms to scale back hiring and begin widespread layoffs in an effort to cut costs. Nearly 130,000 tech jobs across tech’s largest companies have already been slashed in 2023 and many more are still on the chopping block.
One reason why tech companies have been so bloated is due to the immense demand for online services during the pandemic. Massive companies like Meta, Google, Amazon, and Apple hired extra workers to compensate for the increased workload. For example, from 2019 to 2022, Amazon’s headcount has grown by 106%, Meta by 103%, and Snap by 96%. Now that demand has fallen, however, those same employees are liabilities.
The recent collapse of Silicon Valley Bank (SVB) also has massive implications for the health of the US economy. Bank runs were largely viewed as events of the past, but SVB’s resulted in the second largest bank failure in US history. This is especially serious for the tech industry as many Silicon Valley firms chose to bank with SVB.
It is unclear whether crises like SVB’s collapse will spur even more drastic action from tech firms. It may scare management teams into halting projects, limiting new investment, and reversing hiring more than we’ve already seen. When considering that unemployment figures are still relatively low and inflation has been cooling, this all paints an uncertain picture for the future of the economy.
Tech Job Market Outlook
High Demand for IT:
Even amidst hiring freezes and tech layoffs, the demand for IT workers is as strong as ever. One estimate places an 85 million tech worker shortage around the world by 2030. This is largely because of the rise in digital products and systems across all facets of business and personal lives.
While the current economy may force firms to reduce their numbers of tech hires, this does not mean that future hiring will be affected. Fundamentally, the tech job market is sound because companies always need employees to run and improve their systems. While it may be tough for those currently seeking employment, all can expect demand to rise again once firms feel safer about costs.
Cutting Extravagant Benefits:
Tech layoffs and cost cutting may even be a great thing for the industry. Many believe massive compensation packages and campus perks like fully stocked micro-kitchens are unnecessary. It’s commonly held that software engineers at the biggest companies are overpaid and underworked. Thus, recent layoffs have served as a minor reality check for the largest firms to make changes.
The nature of remote work post-COVID has given rise to a trend that tech employees call being ‘overemployed.’ Essentially the practice of holding multiple jobs, being overemployed is manageable simply because many tech jobs require so little time. An engineer at Reddit even wrote that he had two jobs making a combined $295,000 and only spends 15 hours per week working.
While many are fearful that their employers will learn just how underworked they are, this doesn’t stop them from pursuing multiple part time or contract gigs. There is currently a surplus of part-time tech jobs in the market right now because they allow companies to more easily adjust to a changing economy. Hiring and subsequently laying off full-time employees is more expensive and time intensive. This is certainly advantageous for those looking to pick up extra work.
Ultimately, this is evidence of a broken tech system built upon remote work policies and unnecessary positions. Whether this deadwood will be fully cleared out by recessionary fears in 2023 is yet to be seen.
Many view the current tech layoffs and cost cuts as evidence for a larger problem in the economy. The failure of Silicon Valley Bank certainly did nothing to help fears. Regardless, IT workers will always be needed in ever increasing quantities. As such, firms can partner with tech talent networks like Momentum which guarantee excellent IT talent.