Computer Science and Technology companies aren’t hiring very much at all right now. What causes this and what metric can people use to quantify “badness” of the market? Low net profit?
In: Economics
Unemployment rates, the number of jobs in a sector available, disrupting technologies for specific industries, global insecurities, median pay rates for industries, the need to work, typical benefits for specific jobs, etc.
When you look at all these factors you can determine how a market is doing and get a feel for if its a good or bad job market.
Example: A new technology comes around that allows AI to write movie scripts. This puts a lot of writers out of work since the AI can do their job. The movie studios don’t need to hire any new writers to replace them so there are fewer writing jobs available but still the same amount of writers. The few writers that do keep their jobs, the ones who work for companies that can’t afford this new AI yet, now have to compete against a TON of writers who are out of work. So perhaps these writers who don’t want to lose their job take a pay cut or work twice as hard so that they don’t get fired. All the while a new writer, fresh out of college and looking for their first job takes a look at the ‘job market’ and realizes ‘wow this is a really bad time to be a writer.’
Companies tend to freeze hiring or cut back on headcount when they don’t see growth in revenue/profits ahead, see uncertainty, or just have a lull in need like they’ve just launched a major new product.
Right now, there’s ongoing uncertainty whether we’ll have a recession or not, compounded by uncertainty resulting from an upcoming presidential election.
On top of that, tech companies were fighting each other for workers during COVID and many simply overhired, preferring to have workers underutilized and available to staff up projects than have a new project but be unable to staff it up. Without that extreme shortage of workers, companies are reducing their bench. While big tech companies have laid off a decent number of workers in the past year or so, their overall headcounts are generally still way above where they were in 2020. Like Microsoft might have added 25,000 new workers and laid off 5,000.
People can’t afford to pay for a company’s products. The company loses revenue. The company goes bust. All those employed by the company become unemployed and look for other jobs. Except there are fewer jobs because companys are going bust, pushing more people to be competing for fewer positions. Companys that are still up and running are also finding that people can’t afford their products. They make less money. They can’t afford to hire new people. Then they can’t afford to keep their existing staff, so they make them redundant. Those newly unemployed people find there are fewer open vacancies etc etc
The issue at the root cause is cost and profit margin. If your business costs go up (energy, data, rent etc) due to a variety of causes – inflation, supply issues, price gouging etc – you pass those increased costs on to your customers by rasing prices. Then your customers can’t afford to buy your product anymore, and the above cycle begins.
Also, an added issue here is technological developments and AI mean that some companies are no longer relevant, so they go bust. And companies can also utilise AI/tech for much less than it costs them to employ actual people (see for example, Duolingo replacing their transalators with AI). Therefore they have a smaller staff, which means there are fewer open job vacancies.
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