Employers outside the tech sector worry about not having enough workers

We hear a lot about layoffs in the tech industry ever since 2022. Many big tech businesses have reduced their workforces in the past few months to deal with the uncertain economy and the troubles it brought. Google, Meta, Microsoft, Cisco, Twitter, Amazon, and dozens of other tech giants made headlines regarding their large-scale layoffs in the past few weeks. Following the trend set by the tech industry, many Wall Street businesses have begun layoffs as well. Goldman Sachs, Morgan Stanley, and the Bank of America are some notable names among the finance employers who planned to let go of their staff to control the costs of operations.

However, we do not see this trend picking up among employers of other industries. Sure, the media and entertainment sectors had their fair share of layoffs to deal with the dwindling ad revenues, but in other sectors of the American economy, employers are reluctant to let go of their staff. Although news of layoffs was aplenty in December, the number of job losses during the month was not higher than that of any month during twenty years before the pandemic, according to government data. The unemployment rate is the lowest it has been since 1969, at 3.4%.

This surprising resilience of the US job market is both a concern and a cause of optimism for the Federal Reserve policymakers. The low unemployment rate indicates that there is no imminent fear of a recession. However, we have observed how the US job market was hit by the rolling recessions for the past few weeks. From the workers’ viewpoint, the historically strong job market is still intact.

Multiple reasons are causing employers to hold on to the workers they have. Some are reluctant to part with talent because they experienced firsthand how difficult and expensive it was to recruit and train new employees in the last few years. Some employers are worried that they won’t have enough hands to turn the wheels if the economy picks up again rapidly, as during the early pandemic days. A share of employers is still trying to make up for the pandemic job losses. For example, there’s still a half-a-million gap between the jobs numbers of the hospitality and leisure sector pre- and post-pandemic.

The effect of the pandemic and the implications of the resulting robust labor market has fundamentally changed the way American employers think about staffing levels and hiring. The 2020 economy, which came at employers stronger than ever, made them unable to hire and retain staff like they used to before COVID-19. This experience will sit with US business owners for a long time. Many companies in consumer-facing service businesses are avoiding layoffs because they need adequate staff to battle the strong demand.