Every month when the US jobs report comes out, they’re talking about an increase in jobs or a great jobs report. But when I read the news, I keep hearing about these companies cutting 5%, 8%, etc. of their workforce.
Most of them seem to be “white collar” jobs, and I understand why they’re doing it, but the reports feel disconnected from reality. I personally know people that have been laid off. I’m not trying to e political, I’m just trying to understand what I’m missing? Where is the disconnect?
In: Economics
because you will never see articles about “<random company> continues hiring like they normally do”
Layoffs are good headlines. That’s it. Google laying off 10k workers gets more clicks than an article about the 100 small to medium companies that benefitted form Google laying off those 10k workers.
Hundreds of thousands of people get fired from their job literally every month in the US. During the big tech layoffs that happened at the start of last year, tech employment was still going up. As big as Google, Facebook, Amazon, etc. are they are still only a tiny fraction of the people employed in the US.
An article pointing out that 10% of a company’s labor force is only like .0001% of the US labor force isn’t headline worthy.
EDIT. Where the disconnect could be for you is in understanding why companies would be laying off. Some companies hired an insane amount of people following COVID as business was booming (think Amazon). Some companies hired people (Facebook) that they didn’t even need. Well, the rest of the economy started catching up and then the Great Resignation happened and workers were getting crazy pay raises. So now they carry a way larger labor budget than prior so their profits are down and they have to appease shareholders. So, they lay off the people they no longer need to operate and only hired because for a few years they could get away with it. In other cases (FINTECH, ECommerce) there was a crazy market for online trading/shopping that dried up and those companies are struggling now that people are back to normal.
A lot of smaller firms could not compete with big companies during these time periods because they simply didn’t have the money to do so. Now that these workers are back on the market they actually have the opportunity to hire the people they’ve needed for years. It’s kind of a cycle that feeds itself a little. When more companies can compete for labor and therefore increase production, it makes it harder for other companies to compete on the business end. The labor market is really just rebalancing itself still from a long period of weird activity post-COVID.
You’re missing all the companies that hire without making announcements or being on the news. The tech layoffs are a big deal because they involve a lot of people at well known companies, but they are offset by 100 times as many people being hired to work at other jobs.
There are several factors here. One immediate one is the fact that a lot of the companies you’re reading about are big tech, and their severance packages mean that people who are laid off take a long time (many months) to end up in the officially unemployed counting statistics, if they ever end up there at all. So at a minimum there’s a lag on the denominator you’re referencing.
Another, more impactful element is the fact that big tech dominates the conversation out of proportion to the number of people they employ. Amazon laying off 5% of its engineers is objectively a lot of people, but it’s a drop in the ocean compared to the number of people working in the service industry (which is adding jobs like crazy). So the economy as a whole is in fact adding jobs, even including the high profile layoffs.
Finally, remember that the economy is a big place, and just because it’s doing well doesn’t mean you’re doing well, or even all of the people you know. Gains and losses are not evenly distributed, especially in the short term.
The news always reports the negatives and leaves out the positives. Politicians use this to their benefit and amplify the negatives to get elected. As a result, we all think things are bad even during the best of times.
1) The civilian labor force is 167 million people. So when UPS announces that they are laying off 12,000 people — which is a huge layoff — it’s only 0.007% of the labor force.
2) Layoffs from large companies are usually headline news, because a company will generally have to issue a press release about it to their investors and the general public for compliance reasons. A company does not, however, have to report that they hired X people in a week/month/quarter gradually. If 20 companies hire 500 people over the course of a month, it doesn’t make the news.
3) Half of the jobs in this countries are at small businesses, where you will never hear about them either hiring or firing anybody at all. So it is perfectly reasonable that a tech company that went HAM during the pandemic and hired a ton of people will now need to lay some off, while at the same time small businesses (who can’t just hire 10,000 people) are still gradually bringing people on board.
Hiring is done a few people at a time because a company needs to add more capacity in some function. Almost never are there media articles about it because the story that Dave’s Drycleaning added another pants presser doesn’t get much interest. Layoffs tend to be much larger and at all once when the company suddenly realizes it’s going to have trouble making payroll.
I work for a large tech company. Anecdotally I know several people who left my company to go work for a FAANG employer. The headlines about layoffs don’t tell the whole story. Several of those companies are still hiring new people and they’re still paying well enough to steal talent from other high paying tech companies.
One key factor is how they determine “employment” the easiest yet least accurate way is to look at the amount of people that file for unemployment. This is how they normally do this because it’s simple. Problem being is it doesn’t track underemployment nor does it factor in people that have exhausted their unemployment benefits and stopped filing.
You hear about big companies laying off 5000 employees, you don’t hear about 2500 companies each hiring 2 new employees.
Also, unemployment was historic lows, so even though there have been layoffs it still keeps unemployment incredibly low overall.
Many of the tech layoffs are because in the tightest labor market, the companies were basically stockpiling employees so that the had people to staff projects when needed. A company like Microsoft might have added 50k employees since 2021 and are now cutting like 10k, so they’re still far above pre-pandemic staffing levels.
There’s typically a few million fired / quit each month a few million hired. An article about 10,000 layed off is a drop in the bucket.
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