- Layoffs by Elon Musk and Mark Zuckerberg have some worried that more companies will follow suit.
- Tech experts told Insider that's unlikely to happen, given how tight the labor market remains.
Layoffs are back in the headlines as Elon Musk and Mark Zuckerberg wield the ax at Twitter and Meta respectively.
Almost 15,000 workers at the two companies lost their jobs this month, with Salesforce and Lyft also cutting roles.
While some are understandably worried that more layoffs are around the corner, especially as the likelihood of a recession grows, there are reasons to remain optimistic.
Industry experts told Insider that most employers simply can't afford to lay off large swathes of workers if they want to make it out the other side. Nevertheless, unemployment may rise, and you may get less out of your employer than before.
Massive economic headwinds — but a tight labor market
Layoffs across big tech companies may have come with their own context, but they also arrived under the shadow of an increasingly bearish economic climate.
Decades-high inflation has increased costs for companies, which also face higher borrowing costs as interest rates rise. Big tech is reporting a significant slowdown in digital-ad revenues, one major signal that the economy might be faltering.
Yet the macroeconomic picture remains complicated. Insider reported that the "growth-recession" forecast for 2023 will have a relatively benign effect on the labor market.
And while Bank of America predicts US unemployment to rise to 6.5%, that would still be much lower than double-digit joblessness rates experienced in the last two recessions.
Daniel Zhao, the chief economist at Glassdoor, told Insider that the recent tech layoffs alone weren't enough to move the unemployment figure yet, but were still a signal of sorts. "If the economy contracts or slows further, it's reasonable to assume that the job market will slow further as a result," he said.
Even still, employees are still quitting at relatively high rates, with 4.1 million Americans walking away from their jobs in September. Industry experts said there's a reason employers aren't jumping the gun on layoffs as the economy slows.
Your employer probably wants to hang onto you
Ravin Jesuthasan, a global-transformation leader at the asset-management company Mercer, told Insider that even as costs rise for employers, layoffs are simply not an option for many businesses.
"I don't think companies got ahead of their skis in hiring because it was so difficult to find talent," he said.
Most CEOs planned to reduce hiring in 2023, but at the same time, half said they had increased their hiring budgets, Jesuthasan said.
"Overall we're probably going to see a reduction in force, but we're still really short of some of the critical skill sets," he said.
The participation rate in the labor force — the share of people working or looking for work — was at 62.2% in October, 1.2% lower than the rate in January 2020.
Nick South, a managing director at Boston Consulting Group, told Insider this means employers are still struggling to find enough high-caliber talent.
"They're really conscious about how hard it's been to attract and keep people, so they're really mindful of how you keep hold of those people with a really compelling value proposition," he said.
Add to that a major skills shortage, South said, and employees are likely to have much better bargaining positions than they did in previous recessions.
Choice may dry up
What may be ending, though, is the "Great Resignation," a pandemic-driven period characterized by high demand for employees, with low supply. That's because talk of a recession, and falling vacancies, will keep employees in place for longer, Jesuthasan said.
Stephan Meier, a professor at Columbia University, told Insider it's going to be harder to find jobs and employees may not be quite so relaxed about finding a new role for long.
"Before you would quip that you go to the beach or you go skiing for a month, and then you pick up another job with a better package. I think that's going to change for the period where we are in this downturn," he said.
There are some signs that employers are getting bolder. A recent Glassdoor study found that ghosting of employees had tripled since 2019. Zhao said companies may invest less in the candidate experience when the labor market is less tight.
Still, Meier said that ultimately, employees are still likely to enjoy perks that didn't exist before the pandemic, with Zhao calling this a structural shift built to last.
"I think those employers that take this downturn and say 'Oh, let's shift back the power and treat our employees badly,' they're not going to be the ones who are going to be successful," Meier said.