Labor market still tight even with mass tech layoffs

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

Last year, tech companies laid off about 160,000 workers and just weeks into the new year, another 100,000 have already been impacted. The number is climbing every day but overall it has hardly moved the dial on the unemployment rate, which is at the lowest it’s been at in 53 years. Right now there are about 5.7 million unemployed workers but a whopping 11+ million job openings. 

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.