In the hot labor market, there are technical layoffs and delays in employment, – Reuters

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US employers added more jobs than expected in April amid a tough labor market, the Bureau of Labor Statistics said on Friday.

But the technology sector, which has risen during the pandemic, is showing signs of shrinking.

Parent company Facebook Meta is suspending hiring and cutting some hiring plans, Insider reported last week based on an internal note it reviewed. “We regularly re-evaluate our human resources reserve based on the needs of our business, and given the recommendations on the costs of this period, we are slowing its growth,” said a CNBC spokesman.

Amazon’s chief financial officer told analysts about the company’s profits that its warehouses became “overcrowded” after a wave of mass hiring during mass outages that prompted more and more consumers to shop online.

It’s not just the biggest technology companies.

In a statement received from CNBC, the CEO of Uber told employees that the company “treats hiring as a privilege and will consider when and where we add staff,” adding: “We will be even more uncompromising about costs at all levels.”

Retail brokerage Robinhood recently said it was cutting about 9 percent of its staff to eliminate job overlaps after a large number of hires. Earlier this year, Peloton announced it would cut its workforce by about 20% as part of cost-cutting measures. And startups such as the video app for celebrities Cameo, recently announced a series of layoffs of about a quarter of its staff, according to the first information.

Budget cuts contrast sharply with the rest of the economy, where jobseekers still have significant bargaining power and employers face rising labor costs amid rising inflation and a wave of layoffs. In April, employment growth in the leisure and hospitality industry led by 78,000, indicating that demand for the pandemic is returning.

Experts say the factors affecting the technology industry are unique to a sector that has grown rapidly during the pandemic, and does not necessarily point to a wider downturn. While some of the pressure may also be due to macroeconomic trends that may later emerge in other sectors, many economists expect the tough labor market to last for some time due to an aging economy, US population and other factors.

Inflation and other macro factors

Trends in the technology sector can be difficult to track in job data across a wide variety of business models in the industry, from storage on Amazon to advertising on Facebook. But looking at the information sector as reported by the Bureau of Labor Statistics, Veneta Dimitrova, a senior U.S. economist at Ned Davis Research, said: “Work”.

However, inflation can be a driving force in employment in the technology sector, as well as in other sectors of the economy.

Terry Kramer, an associate professor at the UCLA School of Management, said a company like Amazon is an indicator.

“Inflation is 8%, economic growth is starting to slow down, people just don’t buy that much,” Kramer said. people are just more attentive to what they buy. Because with inflation, consumers can spend less dollars.

For a company like Amazon, inflation means increasing business costs. “If the consumption of their products and services doesn’t grow so well, so high, it could eat up their profits,” said Agron Nikai, an associate professor of economics at The Conference Board. “That’s why they have to slow down.”

But slowdowns in other companies may be more specific to their business. For example, Kramer linked the suspension of Target’s hire in part to changes in Apple’s privacy that hurt Target’s ability to target advertising.

Recovery after a pandemic

The technology sector was one of the biggest beneficiaries of the behavioral changes in the midst of the pandemic. As offices closed and people spent more time at home, investors flocked to so-called home-based stocks such as Peloton, Zoom and Netflix.

As people return to the office, travel and eat at the restaurant, many of these companies have had to rebuild.

“When the pandemic hit, it was a shock in terms of benefits,” said Daniel Manaenkov, an economic forecaster at the University of Michigan. As these benefits have changed, he added, the government has intervened to help businesses where demand has suddenly hit a wall.

Now the cycle is returning, but without the help of the state.

“Now that we are experiencing a backlash, there is no help from the government, but it is still a shock of advantage,” Manaenkov said. “So it could be a bit painful for a sector that has benefited from a pandemic. But also for the people who worked there, because they will not get high unemployment. “

If layoffs in the technology sector become more widespread, it could affect the entire economy, Manaenkov said. Without government incentives, laid-off technicians could cut discretionary costs, which could lead to a wider market slowdown.

But some large technology companies have actually expanded into different parts of the country, which may indicate that they are still experiencing the effects of a limited talent market, Nikaj said.

Looking at the economy on a larger scale, job security for workers is currently fairly stable.

“This is probably the safest time to keep a job right now, because the job market is very tense,” Nicaea said.

Rebalancing the venture capital portfolio

According to Mark Peter Davis, managing partner of the New York investment and incubation firm Interplay. York, the slowdown in hiring among venture startups may be the result of the so-called “denominator effect”.

It starts with large institutional investors who own a variety of assets, including government stocks and venture capital. If the value of public shares falls significantly, these investors will suddenly find themselves with a relatively larger percentage of their venture capital portfolio, and they will have to rebalance, limiting new venture capital investment.

As a result, institutional investors may begin to abandon venture capital to balance their portfolios. This can affect the startup financing landscape, forcing companies to cut cash costs – in some cases, layoffs.

Martin Pichinson is co-chair of Sherwood Partners, a Silicon Valley firm that helps restructure or liquidate startups. He said his business remained fairly stable after a short slow period covering parts of 2020 and 2021. He attributes the slower time to the proliferation of government loans from the Salary Protection Program, which have essentially given some small businesses an extra path. But since then, he has seen the business gain momentum.

He said the stability of his business is largely due to the venture capital model, which relies on high stakes, assuming that many will eventually fail. This is especially true now that IPOs have stalled, making it difficult for startups to come out and give investors a refund.

From hypergrowth to effective growth

Kramer noted that the slowdown in hiring technicians does not mean that the industry has stopped developing.

“People need to see how much they’ve grown in the last two, three, four years because of Covid,” Kramer said. “If they grow to 30, 40% and then go down from zero to 5%, they’re still growing and they’ve already hired so many people.”

Two hiring platform executives said they still see a commitment to hiring from technology companies, but the overall approach has changed.

Jerome Ternink, CEO of the SmartRecruiters talent platform, called it a transition from “growth at all costs to effective growth.”

“Investors have made it clear that now is the time for technology to continue to evolve, but that money is no longer free,” Ternink said, pointing to a sharp drop in market value in the technology industry. “This means that technology companies have a slower pace of recruitment.”

According to CEO Josh Brenner, Hired, the technology and sales-oriented employment platform has not yet declined, and according to CEO Josh Brenner, it has actually seen more investment in hiring Big Tech, although he expects some instability around smaller ones. technology companies.

“From what we have seen, companies are focused on long-term employment, learning about the rollback that occurred in 2020,” he said in a statement. “You should not turn off the rental conveyor. Given that the companies had to catch up last year, we are not surprised to see some relative slowdown from year to year.

Davis, a venture capitalist, still sees great opportunities in investing in startups, because hard times “starve weak companies” without killing the strong.

“I told the LPs we’re talking to that it’s actually hunting season,” Davis said. “Now is the perfect time to invest in work. And many large companies were created after the last cycles of recession. “

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