Labor market still tight even with mass tech layoffs
Why it is still hard to find great talent even though everyone seems to be laying workers off.
February 21, 2023
One massive layoff announced after another. Tens of thousands of top tech professionals are now “open to work.” Yet, the labor market hasn’t taken a huge hit and filling open roles remains a challenge. Just because there are a lot of new candidates available, it doesn’t mean they are going to be desperate. The labor market still seems to be in favor of workers and many companies – in other industries – are looking to swoop up newly available tech workers.
Tech is a small slice of the labor market pie
Everyone is talking about the mass layoffs happening at Google, Facebook, Amazon, Microsoft, Zoom, and more. Each headline is more shocking than the next. Despite how big tech feels – it only makes up a fraction of the labor market though. According to the US Bureau of Labor Statistics (BLS) the information sector accounts for about 2% of the market. That is a sliver compared to industries like healthcare, leisure and hospitality, and retail.
While tech companies are reducing staff, tech skills still remain high in demand and many other industries are ramping up their hiring for these roles.
That said, layoffs are spreading to other industries and large companies – Disney, Goldman Sachs, and Bed Bath and Beyond are just a handful who have announced huge layoffs as well. The otherside of the coin though is tech jobs are growing in other industries, including health insurance, defense, and banking. While tech companies are reducing staff, tech skills still remain high in demand and many other industries are ramping up their hiring for these roles.
There is a stubbornly low Labor Force Participation Rate
What the unemployment rate doesn’t account for is a whole section of the population – people who are eligible to work but are choosing not to. To better understand the tight labor market and why there are 2.9 million fewer people working now compared to February 2020 – we need to look at the stubbornly low Labor Force Participation Rate. This is the current number of people employed and actively looking compared to the number of people who are eligible to work (are at least 16 years old and not in prison, a nursing home, or a mental health facility). There are a variety of reasons the Labor Force Participation Rate has dropped to 62.4% since 2020.
Many have retired and more retirements are on the way out. The pandemic drove more than 3 million workers into early retirement. And now, the largest segment of the population – Baby Boomers are reaching retirement age and there aren’t enough young workers to replace them.
Another factor is increased savings creating a cushion to remain out of the labor market. From stimulus checks to reduced expenses during the pandemic, many were able to save money creating a financial safety net to stop working.
A lot of workers left their jobs in 2020 to care for children or family members – more women than men in this case. Child and family care is one of the main reasons why unemployed workers surveyed by the US Chamber said they have not returned to work. Other factors include Covid concerns, illness, prioritizing health, and learning new skills or education.
Tech workers should shift their search
Overall hiring may still be tight but the tech layoffs do mean new available workers and there is a need for their skill sets. Added tech jobs outpaced layoffs last year with 264,000 jobs added to the IT market. Job seekers may need to readjust their search mindset though – since many of these roles are at non-tech companies. Demand is spiking for skills in clouding computing, AI/ML, web3, and more. This is in part because more technology is being used at organizations, no matter the industry.
If there is any lesson to be learned as we witness numerous tech layoffs, demand in tech skills shifting, and people choosing not to work – is that people and organizations must remain agile during these uncertain times.
Now more than ever, it’s mission critical to build world-class employee experiences for remote and hybrid teams.