The on-going mass layoffs do not represent the failure of Tech Careers instead the Tech Opportunities are growing day-by-day and most of the layoff employees got other jobs within a couple of months. The recent layoff announcements at Google, Amazon, and Microsoft impacting a total of 40,000 employees have many worried about the job market. Ever since April of last year, there has been an explosion in headlines about layoffs and warnings about the labor market being weaker than it appears.
The economy in early 2023 is not being roiled by layoffs which are currently abnormally low compared to historical standards. This means the labor market remains tight, despite arguments to the contrary. As a result, hiring will remain tough, and I had plenty of time to think about these headlines on a recent business trip back from Atlanta. I was standing in the airport security line for TSA PreCheck.
Almost half, 44%, of the top 25 were tech jobs. The possibilities in tech extend beyond the traditional technology giants to areas like retail, finance, professional services, travel, and tourism all of which need technologists to build firms’ online presence and business, Scott Dobroski, Indeed’s career trends expert, was quoted as saying. “The tech skill set is very much in demand by companies everywhere,” Dobroski said. “Because every company today is a tech company.”
“Had tech companies continued growing at the breakneck 2020-2021 pace, they would have monopolized US tech talent and made it impossible for employers in non-tech industries to hire tech talent,” she was quoted as saying. “Now, other industries may stand a chance.” Aside from good news for existing tech workers, high demand for technical skills is also a “big sign” of where opportunities exist for those starting or switching careers, Indeed said.
I decided to take a look at the macro trends to answer these questions. The Bureau of Labor Statistics (BLS) has tracked the share of the labor force being laid off any given month since the end of 2000. In a typical month, about 1.5 percent of the non-farm private labor force is laid off or discharged from their job. If this number approaches 2.0 percent or above, I would call it an employer’s market, and if it approaches 1.0 percent, a candidate’s market or a tight labor market.
Since the beginning of 2021, it’s consistently been a tight labor market. ay even mean central banks will have to keep interest rates higher for longer. Some folks I speak with argue that there is a lag in the data and that the latest headlines have not yet been reflected in the numbers. I’ve been hearing this argument since April of 2022, yet, month after month as the lagged data is reported the layoffs have remained at the historically low level of 1.0 percent.
It’s worth noting that before 2021, the BLS does not have a single month on record where fewer than 1.3 percent of the private labor force was laid off. In the past 12 months, there has only been one month where more than 1.0 percent of the private labor force was laid off. By any objective historical standards, we therefore still are in an incredibly tight labor market.
None of this is to say that the labor market won’t slightly cool off at some point soon. The Fed has signaled that it will keep interest rates high until inflation cools off and higher interest rates will soften demand in other economic sectors. Eventually, lower demand in the economy will lead to a softer labor market. But don’t expect a redo of the 2008 employer’s market anytime soon.
The first reason that I’m confident about the labor market continues to be resilient is that there are not enough workers out there. In the Great Recession of 2009, companies had an ocean of applicants for each job opening. This time around, if the economy is weakening the impact on the availability of talent has been strange. Instead of having an abundant talent pool to recruit from, companies find themselves fighting over a tiny talent puddle.
The U.S. civilian labor force is currently just shy of 165 million people. While some have pointed out that this brings us to the pre-pandemic number of working Americans, this translates to a one percentage point drop in the labor participation rate due to population growth. At the pre-pandemic labor force participation rate of 63.4 percent, America’s workforce would be at just under 168 million individuals.
The civilian labor force is therefore short of the net of three million people since the beginning of the pandemic. Let’s review where these three million missing workers might have gone. The U.S. has had 1.1 million Covid-19 deaths. An estimated 35 percent of these Covid deaths were part of the current workforce. This translates to about 400 thousand workers missing, just because of Covid deaths, not a small number.
Additionally, the Brookings Institution estimates that there are about 4 million workers with long Covid. Some of these workers are still working, even if at reduced hours. Taking into account individuals working at reduced hours, about 1.6 million full-time equivalent (FTE) workers could be out of work due to long Covid. So maybe not so surprisingly, by some government estimates U.S. sick leaves have doubled compared to historical standards.
The sudden decrease in the availability of labor has led to an uneven recovery. While some industries and geographies have been able to return to being fully staffed, many are still struggling. I experienced this at the airport security line, and you probably experience it anywhere from when waiting for a table at a restaurant to trying to get ahold of a customer service representative at a call center.
In a recent report, the National Federation of Independent Business showed that the hiring struggles of main street business owners are still very real. Of those hiring, 90% reported no to few qualified applicants for their open positions. And the BLS still reports 10.5 million unfilled jobs, 38 percent higher than the pre-pandemic record of 7.6 million.
Given the current backlog of vacant roles coupled with a drop in labor force participation, American businesses are likely to continue to struggle to hire for months to come. And I will need to learn to be patient when waiting in the TSA PreCheck line. Workers should also consider where their current skills may be able to transfer to another discipline, Dobroski added. Human resources roles, some of which factored among the 25 best jobs in 2023, may be able to leverage skills from sales and marketing backgrounds, for example, he said.