Tech & social media companies went nuts during the pandemic hiring-bubble, then sobered up. Now it’s already over.
By Wolf Richter for WOLF STREET.
In terms of actual workforce reduction, let’s look at Alphabet for a moment. In its earnings report on Tuesday evening, Alphabet disclosed that the “substantial majority of the employees affected by the reduction of our workforce” – the 12,000 layoffs announced in January – “are no longer included in our headcount as of June 30, 2023.”
As of June 30, Alphabet’s headcount, at 181,798 full-time employees, was down by 8,436 from the peak as of December 31, just before the announcement. Yet, year-over-year, compared to June 30, 2022, the headcount was still up by 7,784 employees.
Tech and social media companies had gone nuts during the pandemic-hiring-bubble. In Q3 2022, at the peak of the feeding frenzy, Alphabet had added 12,765 employees. In the year 2022, it had added 33,734 employees. In 2021 and 2022 combined, Alphabet had added 54,933 fulltime employees, increasing its headcount by 41%. Those were huge numbers in crazy times, with most of them working from home, to where, as I can imagine, no one really knew anymore what anyone was actually doing. Musk fired something like two-thirds of Twitter’s employees and contractors and got away with it. What were all these people doing anyway? In the layoff announcement in January, CEO Sundar Pichai said, “we hired for a different economic reality than the one we face today.”
Google’s headcount reduction of 8,436 employees through June 30 from the peak on December 31 spanned the globe. The US count was much smaller. And many of the laid-off employees found work quickly.
While these layoffs were weeding out a lot of people, Alphabet still hired new people. Some had gotten laid off by other tech and social media companies, some it hired away from other companies, and some of those now vacant slots at these companies were filled by laid-off Googlers. Other companies – such as automakers staffing up their new EV divisions – finally had a chance to hire tech workers as they were no longer hopelessly outbid by tech companies.
So these tech layoffs that were all over the news last year and earlier this year created mostly churn, with a lot of empty slots getting filled elsewhere.
And we can see that principle at work more broadly in claims for unemployment insurance filed by people who’d gotten newly laid off.
Initial claims for unemployment insurance backtrack. The number of initial claims for unemployment insurance that people filed in the latest reporting week with state unemployment offices fell by 7,000 from the prior week, to 221,000 initial claims, seasonally adjusted, the third week in a row of declines, and back to February levels, according to the Labor Department today. These claims for unemployment insurance are now back at the low end of the past 50 years.
The 4-week moving average irons out weekly ups and downs, but it lags a little behind. And we can see that the mild uptrend that started early this year sputtered out in April, and then reversed:
“Continued Claims” backtrack. The number of people who are still claiming unemployment insurance at least one week after the initial application – people who haven’t found a job yet – fell to 1.69 million, the lowest since the end of January, as people find jobs more quickly than earlier this year and are rehired more quickly and come off the unemployment-benefit rolls faster.
Alphabet was just one example. With the big tech and social media companies, it followed the same pattern: Big layoff announcements globally, but a smaller headcount reduction because hiring continues to this day, and only a portion of the headcount reduction took place in the US, and then those workers got picked up quickly by other companies that have been struggling for talent, and a lot of them ended up in new jobs that still paid very well – but less than their prior jobs.
It did put a lid on employment growth in the tech sector. Employment in the “Information” sector saw a Googlesque hiring boom in 2021 through mid-2022 that then suddenly turned south, with employment dropping for a few months late last year. But this year, employment has inched up again.
The “Information” sector includes web search portals, data processing, data transmission, information services, software publishing, motion picture and sound recording, broadcasting including over the Internet, and telecommunications.
So this layoff spree turned into massive churn – rather than a pileup of unemployed workers – with most of the laid-off people changing jobs within the industry. But some changed industries, such as switching to the tech divisions of industrial companies, and so the headcount in Information fell last year, before starting to inch back up this year:
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There will be no recession until 1st time unemployment claims move well above 250K, stays there for at least 6-8 weeks and moves towards 300K, offering a strong signal. Likewise, the 3M continued unemployment claims is the general threshold for the NBER to declare an “official” recession. It’s that simple, people.
The historic recession point was closer to 350K recently, and above 400K in the 1980s (black line):
I knew you’d pull out this graph which is more accurate. My main point is, of course, that we’re a long way off from a recession in terms of a rise in unemployment.
Thanks, Wolf!
Population has also increased more than 50% since 1974.
250k unemployment claims has much less significance in 2023.
Almost need a population adjusted metric.
Yeah, and there won’t be any meaningful price drop in housing unless there’s significant unemployment.
Things have been looking pretty decent the last couple years. Maybe Jerome really is succeeding and we’re actually not peons.
Turtle,
Last time, it was the other way around. Housing started tanking in 2005/6, eventually nearly blowing up the financial system and triggering the Great Recession and unemployment crisis. Employment continued to grow throughout 2007 and didn’t decline until February 2008, by which time housing had been in collapse-mode for 2+ years. So don’t rely on employment as an indicator of what housing will do.
I once not too long ago got into a kerfuffle (who me? lol) on another well known economists blog who now constantly screams doom. I pointed out something similar and the answer he gave me was total garbage. This guy used to be pretty good, but over the last decade I think he lost himself to his own echo chamber. I find Wolf’s analysis the most informative and balanced now.
All the indicators point to doom. The only reason tech is re-hiring again, is because they’ve farted-up a new hype-bubble: AI. The reality is, there have been no massive AI breakthroughs, and use cases are far and few between, so it is unlikely to drive any real-world revenue streams for the vast majority of tech companies.
To add to this…I work at a large tech company (roughly 60K employees) that steadily lays off people, and has been laying off many over the last 3-4 years. There are no large announcements, no WARN reports, because they’re extremely systematic about it, and pick and choose numbers and locations accordingly, so they do not have to disclose. Many that have been laid off from my team over the last 3-4 years, have not found any relevant employment.
One of my neighbors stopped by to talk the other day while walking her dog. Turns out she is a high end nurse who travels a lot, we talked about her doggie care issues. She said that she works from home and that AI has changed her life. She gets a huge productivity boost and loves it. We didn’t have time to talk long but that was just a comment she made.
It’s called stealth layoffs, to thwart the WARN act. Which is why we cannot have reliable layoff data.
Lily B.
Good lordy.
1. Unemployment data and layoff data do NOT come from WARN data. Where do people get this BS? No one tracks WARN data for layoff or unemployment data purposes. I’ve discussed the raw data a couple of times, but not to track.
2. Unemployment claims data, cited in this article, come from state unemployment offices when the laid-off people file for unemployment benefits. So if they want their unemployment insurance cash, they’re going to show up in the data.
3. The layoff and discharges data come from regular Census Bureau surveys of a large number of companies about their hiring, quits, layoffs/discharges etc. This is the layoff data from those companies. Note that in past layoff waves, the layoffs show up just fine and spiked off the chart. Note that even during good times, there are about 1.8 million layoffs and discharges per month, which is part of the normal churn. Since the pandemic and even since the layoffs started, we’ve been below that, a sign that the labor market is still tight.
>Many that have been laid off from my team over the last 3-4 years
So an honest question from a fellow tech company employee from NC – do you think those folks that have been laid off actually HAD reasons to be laid off?
I witnessed very few layoffs from 3 different companies over the last 10+ years and, to be completely honest, all, but maybe one of them, tried really hard to get fired lol. We are talking systemic failures to meet deadlines, frequent confrontations with peers and managers, obviously higher interest in side gigs and sometimes even openly working on those on their main employer’s time etc. etc. etc., I can keep going on, but I think you get the idea.
Now I deliberately don’t use the word “deserved”, but in most of those cases if you asked someone around these people “who do you think would be on a chopping block if worse comes to worst?”, most of their colleagues would quietly point fingers on those folks.
That said, do you think that systemic layoffs can actually make companies (and the economy as a whole) healthier and more productive?
Fart-bubble, agreed, indeed.
Depends on your definition of doom. An economy built on a how of cards and government handouts is my definition of doom.
Because of demographic shifts right now, couldn’t we have a recession without high unemployment? As the largest generation retires, most companies are having a hard time replacing the skilled workers. If there is no replacement, then that decreases goods and services. You have low unemployment, but an ever shrinking employment pool trying to support a mass of old people.
“we hired for a different economic reality than the one we face today.”
So Google of all companies thought they pandemic economy would continue forever? So many Ph.d’s…so little common sense.
Google is run by Sundar Pichai, an MBA.
So many MBAs…so little common sense.
My general rule of thumb is to run away from anything run by MBAs. They have a remarkable ability to make massive profits in the short term and then have catastrophic losses in the long-term.
I had to sell my deceased father’s apartments. I interacted with a bunch of realtors and even a developer. Several of them (including the sales consultant for the developer) had an MBA.
Run from the MBAs. Run, run, run!
You can *run* from an MBA KingKong – but you can’t *hide*.
For they are everywhere.
I have an MBA, obtained in 1989. Sometime ago I reached the conclusion MBAs are largely responsible for all of the current problems in our country that lawyers are are not responsible for.
curiouscat, when I worked in manufacturing (real goods, not digits), the bean counters got in charge and really messed things up. So add them to the list.
Cat,
Nice comment there! I’d love to have some kind of accurate “scale algorithm” to see which group is worse overall.
Probably like everything else, depends on context.
“So many MBAs…so little common sense.”
LOL… Wolf has an MBA from the same institution that gave me mine.
Rodney Dangerfield in Caddyshack… “Oh but it looks good on you!”
He actually has a BS and MS in engineering.
I guess that shows how destructive a More Bad Advice degree is: it removes any intelligence from its host.
“So Google of all companies thought they pandemic economy would continue forever?” ….Maybe not, they just hired as needed at the time and then fired at will. It worked while it worked and was easy to adjust. This demonstrates the commodity nature of workers, not stupidity by corporations.
Here’s my experience: clueless managers had enormous open headcount due to pandemic boom. They hired to grow their herd, by which they are measured in the corporate world (headcount).
Two years later those new positions were fired (laid-off), sometimes including the clueless manager.
Of course upper management and the C suite get more bonuses and ppat each other on the back for the failure to forecast anything.
The tail wags the dog now. Fed may have to break the stock market to slow the economy and thus inflation.
I think everything is building up into a devastating 2024, including a possible impeachment.
Next year will be the one for the history books!!! Looking forward to it.
Impeachment is nothing more than a uniparty distraction tool. There are no facts or rationale to predict it may be coming.
True we can’t know about impeachment because that is in the realm of politics, with conviction or not occurring in the Senate, not in a court. What we know IS coming is conviction on the documents charges, some of them recorded on video, video the perp then tried to delete. The latter crime recorded on audio.
I keep hoping for the great congressional dinosaur extinction event of 2024…
You really want a totalitarian strong man running the show?
Google, Meta and all of the other ad supported tech-media companies are now bleeding Hollywood, after nuking newspapers and magazines, kneecapping broadcast television and radio, maiming cable television, and neutering traditional advertising agencies. It’s hard to believe how many hundreds of billions of dollars revolve around advertising, and tech-media companies like Google and Meta want them all.
Welp, that’s it…you’ve gone & plumbed the well of mutilation euphemisms dryer than a very dry thing.
Wait until spring, Occam.
Hollywood is bleeding themselves. They could have worked with the streaming services to provide a painless means of distribution to the consumer, and instead decided to fracture the market into a trillion pieces yet again and rebuild the cable experience, this time with subscription fees instead of ads and, unsurprisingly, consumers are not having it. If they wanted a share of people’s collective eyeball time they could invest in making shows people want to watch. Instead theyll produce the umpteenth race-swapped live action reboot hoping for nostalgia dollars and call themselves “brave”.
At least some of the laid-off Googlers were hired back into Google in other roles.
Hiring now is far different than before. The depth of applicants is far better than any other time the last 5 years. Top tier tech folks that would have been in startups are now migrating to legacy companies. Everyone thinks they can be project manager now. I’m seeing highly experienced peers really struggle to change companies now. I was fielding 20 recruiter calls a week this time last year to nearly none now.
This is still the good times. When the bad ones come, lets buckle up.
I have a friend who is a Paralegal in the corporate world, is about 50 and is very good at her job. She has gotten nearly everything she has asked for since the pandemic. Full time work from home which eliminated one hour each way commute. Multiple pay raises. She just got another big one simply by asking.
The last year before the pandemic she could hardly get anything because business was bad and people were getting laid off. The company sells business software.
IMHO,the economy is righting itself after 13 years of 0/0 interest rates,a Pandemic and political nonsense..,
Despite all this factors, the economy is growing at a reasonable rate and people are getting use to higher interest rates…
If it can survive the 2024 Election Cycle, it can survive anything…
The higher fixed income rates have effected me mentally. I’m much more confident about the future and my ability to spend. I suspect that’s the same for millions of others. As for the election cycle, I stopped watching and reading news 30 years ago. I’ve found that whomever is running the government actually has almost zero effect on me. It’s more a show than anything. It’s a shame so many people think the world will come to an end if their preferred party isn’t in charge.
“I’ve found that whomever is running the government actually has almost zero effect on me.”
Tell that to the young men drafted and maimed in Vietnam.
Tell that to the 100,000-1 million Iraqis and Afghanis who were needlessly slaughtered by endless wars.
Tell that to the victims of the COVID response, trapped in nursing homes to die, or isolated from social contact in their formative years.
Tell that to the victims of inflation caused by wreckless government spending.
Tell that to fathers who have had their hard-earned wealth and children ripped from them by the tyrannical family court system.
Tell that to working people who pay 50% of their income to taxes, much of which is simply transferred to people who are able but refuse to work.
It must be nice that the government’s insane, tyrannical, and perennially boneheaded actions have no negative impact on your life.
Tell that to a person of color or a gay, lesbian or transgender person.
Don’t fall for the hype. Yes we still have a long way to go, but the LGBT community have it better now than almost any time in the past. If you listen to leftists crow while wearing their Che Guevara shirts, you might actually think they would have loved living in that socialist paradise that routinely murdered both people of color and the LGBT community.
Anyone with half a brain will tell you that both groups of people you reference have it better right now than at any point in history. Context is important.
“I’ve found that whomever is running the government actually has almost zero effect on me.”
ignorance is bliss they say…
but that isnt even the worst part.
yet, just PRIOR to that, you say you feel more confident about the future due to the higher fixed rates?
huh?
who sets the rates?
– the government, via its entity>>> THE FED
yeah i can see there is zero effect on you all right… makes perfect sense.
your naivety is absurd, and really quite a SHAME.
The resilience of the economy is being determined by the changing composition of the money stock.
Not sure I understand your statement, Spencer, but I’m interested.
It’s my less optimistically stated opinion that the brittleness of the economy is dependent on the authoritarian control of the money stock, but I’m thinking that opposes what you’re saying…
I fear a devastating loss of value for the US$ over the next several decades, and the root of that loss will be money stock debasement.
decade(S) ???
hahaha.. haha. ha
thats quite funny.
yeah im sure 2 trillion dollar deficits are going to last a few more DECADES, huh?
Information jobs have been flat the last 2-3 BLS reports.
I suspect that they need to fall further to mean-revert to the trendline in graph #4.
There is a lot of fluff in the tech world right now. BS jobs galore! Elon showed the way; will smart CEO’s follow?
The easiest worker to monitor is the tech worker, meaning one on a computer. The boss can monitor key strokes, content etc. There is no right to privacy on the company’s computer. The hardest to monitor is the outside worker, especially with a city, parks etc.
That genius Musk and his new Brand X? His fired guys who were doing nothing went and started Threads, which has 100 million sign ups, so far. Musk paid 42 billion for T. What is X worth now ?
Threads is going to be road-kill.
Agree with you, on monitoring. However, many tech workers still manage to goof off.
Yeah, I’m sure the guys who were on payroll at Twitter playing golf all day were the ones who started Threads…
What’s Musk ever done anyway? Har har. Too bad about that plea deal huh, bud?
Threads will be a historical footnote in a few weeks.
Are you forgetting he cut his teeth in electronic payments? (i.e. PayPal).
Musk’s plan for X is the same it’s always been.
He wants to build the USA equivalent of Weibo – complete with its own currency. Or perhaps I should say *his own currency* because it’s plainly obvious it will use DOGE coin…which he likely owns the majority of.
One thing Threads has going for it: it didn’t cost 42 billion. M didn’t pay all cash, Tesla stock pledged against loan.
As a grey beard tech workers there’s a lot of what I call “fake tech workers” today. The reason you get paid so much in tech is there’s a fixed supply of ppl who can do the job. As wolf shows, despite very high pay and tons of open jobs between 2012-2020 the industry only found maybe 25k qualified employees per year.
So, do you think something magical happened in 2020 where all of a sudden Gen Z was touched by the hand of god and 200,000 workers stepped out of an interdimensional portal with high end tech skills? No. Instead we have a lot of unqualified folks who won the lottery and are not getting paid for skills they simply don’t have.
At the end of the day I hate corporations so if Google wants to hand out $300k-$400k to some random dude who just tweaks the CSS of some soon-to-be-cancelled product I’m not going to stop them. But let’s just say the industry could layoff 10% more overnight and literally nothing would change.
As someone who works in tech – there seems to be more going on here than just churn. Companies are cutting in the same places – a good example is “enablement” – where entire teams are being let go as part of just about every layoff.
These people aren’t typical churn. They’re probably looking at like 6-12+ months of joblessness – and many will have to alter their roles for the next gig.
These kind of shifts create problem in the long term (think of manufacturing jobs + globalization) even if they don’t immediately show up in the aggregate numbers.
There seems plenty of anecdotal evidence that hiring in tech slowed down a lot lately – see this thread on unusually active thread on the VC oriented Hacker News: Aggregate stats may not yet reflect it.
Read my article. The charts and numbers in my article DOCUMENT that hiring slowed, and that layoffs took place, but after the HUGE surge in hiring. And the layoffs are small compared to the surge in the prior two years. And people are finding jobs quickly as the tech companies with layoffs are STILL hiring.
Wolf wrote:
Musk fired something like two-thirds of Twitter’s employees and contractors and got away with it.
—–
Yes in the sense that Twitter hasn’t blown up yet.
No in that the site is currently in a slow failure mode.
It is like a wooden house with a termite colony nearby that has been kept at bay through protective measures. When you remove those protective measures the house doesn’t get hollowed out immediately. And unless you know where to look it won’t be apparent that the termites have hollowed out the place.
The last month have shown tech related articles for Twitter that it is currently starting to suffer from firing too many people and that things are breaking internally without there being enough employees left to fix them in time before they need to tackle the next.
There is a persistent problem that started after Musk took over that makes it so that Musk owned Twitter cannot operate as old Twitter without it straining the remaining server resources (halving the data center capacity isn’t helping with this either). It has gotten so bad that Musk has put viewing tweets under a limit. Then promptly Twitter DDOSed Twitter, since there is no one left to test code, as part of the code changes.
Then there was the inability to deal with some persistent (according to Musk) scrapers. One of my colleagues demonstratively went and checked the paper calendar to see if it wasn’t April 1st. The team did a collective facepalm when that was cited as the need to take Twitter temporarily registrated only (login screens tend to take valuable sparse resources and letting a scraper hammer that is madness).
And that are just the tech problems that are big enough that they are visible from the outside.
Then there are the regulatory problems. Just take a look at one problem, the consent decree between Twitter and the FTC. No more people collating the data requested by the FTC thanks to Musk firing them for example.terminated. It doesn’t help that the people normally having to sign that those papers are the truth left Twitter after stating that what Musk was demanding, without taking no for an answer, was violating the consent decree. Two weeks ago Musk filed to get that consent decree binned since he doesn’t want to and can’t comply with it. Not realizing that a consent decree is the equivalent of parole. And seeing his fight with the SEC about the consent decree to have his Tesla tweets that might affect the financial markets vetted he is willing to take it to the Supreme Court (which won’t hear the case since) to actually get punished by the law instead of being on parole.
So no he is not getting away with firing 80% of the people who worked for Twitter it is just that the damage inflicted is not yet showing.
Here in Oregon the sun is shining at Intel again. News of hiring in the trades to ramp up tool installation down at the local waterhole yesterday.
But Nike is continuing the stealthy downsizing they have been carrying out over the last year with everything kept below the radar screen.
Re: “tech layoffs that were all over the news last year and earlier this year created mostly churn”
Operation costs are higher today, thus newer employees are eating more profits going into decreasing earnings. Not a great fit, but maybe they add exceptional value during pending weakness?
Amazon now employs more than 1 million people
Amazon added 400,000 jobs in pandemic.
They will soon be unloading these jobs.
They unloaded some of those jobs already, and the layoffs seem to be over.
“While these layoffs were weeding out a lot of people, Alphabet still hired new people. Some had gotten laid off by other tech and social media companies, some it hired away from other companies, and some of those now vacant slots at these companies were filled by laid-off Googlers.
“… So these tech layoffs that were all over the news last year and earlier this year created mostly churn, with a lot of empty slots getting filled elsewhere.”
I watched exactly this in real time. My son was let go from one major Tech company only to be hired by another within 6 weeks. That layoff, by the way, included 6 months severance and a highly competent professional outplacement services person who guided his resume updating and put several offers in front of him. He interviewed at 3 and picked the position most suited to himself, never felt the stress of unemployment, and even banked most of his severance.
Along with the move he gained an almost 6 figure pay increase. Still works remotely, but has opted to rent a WeWork space to separate home time from office time. Not a bad way to be “downsized.”
Meanwhile, the company he, along with a scad of fellow coders, was let go from continued hiring for the same position, offering the same wage scale. So what was the point, from the corporate perspective? Makes one scratch one’s head.