Image Source: Forbes Some of the largest and wealthiest corporations in the United States have been sanctioning job cuts like clockwork recently. Amazon stated last week that it would lay off 18,000 employees, or around 6% of its office staff. Similarly, Salesforce, a software company, announced that it would reduce its workforce by 10%, or approximately 8,000 individuals. Aside from these companies, scores of others made similar announcements. This includes large names like Meta, which owns Facebook, WhatsApp, and Instagram, as well as hardware behemoth Cisco and financial business Stripe. Despite the fact that Silicon Valley is pulling back, the world’s largest economy continues to thrive. According to the most recent official figures, the United States added 223,000 jobs in December. Even though growth was slower than after the pandemic in 2021, it was still solid by most criteria. The unemployment rate fell to 3.5%, one of the lowest points in history.
Does the ongoing job cuts signify more problems?
Most people think the economy will slow down in the next few months because people will spend less because prices are going up. But firms had to pay more to borrow money after the U.S. central bank raised interest rates quickly last year. So, should people be worried about the rising job cuts in the tech industry? Many tech executives justfied the job cuts saying it was so because they hired too many people during the pandemic when more things went online, and business grew. Small businesses are finding it hard to get money because of higher interest rates and a sharp drop in the U.S. stock market in 2022. Also, it has yet to help that some companies have lost a lot of money because the cryptocurrency market crashed. A chief economist at the consulting firm RSM, Joe Brusuelas, said that the wave of tech job cuts was a “necessary and expected” change after a decade of fast growth, partly caused by low-interest rates and ended with the panic over the pandemic. He said that tech companies would no longer be immune to economic changes, like the expected slowdowns in Europe and the U.K. this year. But he said that people shouldn’t “over-interpret” the job cuts because, at least in the U.S., many people who lose their jobs quickly find new ones. Only 5,000 jobs were lost in the information sector, which includes a lot of the tech industry, from November to December. The most recent jobs report from the Labor Department showed this. So, even though thousands of job cuts have been announced in the past few months, more people are working now than a year ago. The head of the IMF, Kristalina Georgieva, said last week that a third of the world would probably be in a recession in 2023. Since many tech companies do a lot of business abroad, this will hurt them. But the U.S. job market has been much stronger than expected. So even though the central bank has raised interest rates to slow down the economy and price increases, this gives some people hope that the country can avoid a deep recession. Nearly every part of the U.S. economy added jobs last month. This was made possible by bars, restaurants, health care, and building companies. Even though the number of job cuts is going up, especially in industries like housing, banking, and tech that are vulnerable to higher interest rates, the number was still near historic lows last year, according to Andrew Challenger, senior vice president at Challenger, Gray & Christmas, which has been keeping track of these kinds of announcements since the 1990s. Jeffrey Pfeffer, a professor at Stanford University’s Graduate School of Business, worries that many layoffs are caused by peer pressure, in which executives feel like they have to cut jobs just like other companies, even if they are still making good money. If this feeling spreads, as he thinks it will, it could make the predictions of bad times in the economy come true.
The U.S. economy added new jobs in December
Even though the economy struggled with the effects of prices going up quickly and massive tech job cuts, job growth stayed strong in the U.S. last month. Employers added 223,000 jobs in December, which brought the unemployment rate down from 3.6% in November to 3.5%. People are hopeful that the largest economy in the world will avoid a serious economic downturn this year because of how strong the job market is. The U.S. central bank is raising the cost of borrowing money to slow down the economy and reduce price pressures. As companies try to deal with the effects of higher interest rates and the possibility that people will spend less, the news that banks and tech companies like Amazon are cutting many jobs has gotten much attention. But a monthly report from the U.S. Labor Department showed that jobs were being added in almost every area of the economy. Bars, restaurants, health care, and building companies helped the growth. Read Also: Hong Kong set to lift hamsters importation ban Even though the number of job cuts is going up, especially in the tech industry, they were still close to all-time lows last year, according to Andrew Challenger, senior vice president at Challenger, Gray & Christmas, a company that has been keeping track of these kinds of announcements since the 1990s.