What do all the layoffs mean in a supposedly “good” economy?
What do all the layoffs mean in a supposedly “good” economy?
The economic news has been sunnier as we kick off 2024. But the news out of corporate America hasn’t exactly matched that. In the last few days, Microsoft, eBay and Salesforce have joined the list of companies that have made layoff announcements this month.
Churn in the labor market is expected, even necessary. And Daniel Keum a management professor at Columbia, says an important piece of that churn has stalled.
“People are just not quitting their jobs. So to get back to that natural rate of turnover companies are resorting to layoffs more than they have in the past,” Keum.
The quits rate has declined over the past year. The last Job Openings and Labor Turnover Survey put it at just over 2%. While workers stay in place companies are trying to innovate.
“So they’re experimenting very actively and that experimentation entails hiring and firing,” said Keum.
Experimentation usually kicks off at the beginning of the year says Layla O’Kane, an economist at Lightcast, a labor market analytics firm.
“Because people are reviewing their budgets, trying to do some planning for the year ahead, understanding what their main goals and perspectives on the company are going to be for that year,” said O’Kane.
New year, new priorities. Especially in tech where recent layoffs are concentrated. Angelo Zino, an equity analyst at CFRA Research, says the industry is focused on generative AI development which is expensive.
“One way for some of these tech companies to really kind of pay for some of these gen AI investments is to cut down in headcount,” said Zino.
Not so long ago tech companies could throw spaghetti at the wall and see what sticks. Now growth has slowed. So companies have to be choosy about their projects.
“So in order to continue the level of investments that they want to, it does require better streamlining in many instances,” said Zino.
He says while recent layoffs aren’t a fixture of the greater economy right now they could become more consistent in tech.
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