The recent tech layoffs in the US reflect signs of a slowing economy but you do not need to worry about a recession yet

The job losses in the tech industry were high and widespread. But we don’t need to anticipate a domino effect of job cuts across other industries because of it, economists predict. Meta, the parent company of Facebook, recently announced its intention to fire over 11,000 employees. Amazon announced job cuts for 10,000 people, while Twitter is planning to let go of almost half of its workforce, amounting to 7,500 jobs.

Some of these layoffs have the potential to seep into other related industries. However, we must see the clear picture behind some of these job cuts. Twitter layoffs are entirely owing to the fact that the ownership transferred to Elon Musk after which they realized the mistakes of overzealous pandemic hiring. According to Jason Furman, an economics professor at Harvard University, “There’s always some spillover. If people lose their jobs, they spend less money in the area they live. But I think the sort of direct knock-on effect is much smaller than your traditional mass layoffs, in say manufacturing.”

Jan Hatzius, Goldman Sachs chief economist, believes that the tech layoffs are not a sign of an impending recession. He says that the unemployment levels would not even rise by 0.3% even in a scenario where a majority of tech employees lose their jobs. According to another economist, Nela Richardson, the job cuts at Twitter and Meta are unique corporate events untied to the broad labor market.

These layoffs come at a time when the US economy just recovered from the job losses of the pandemic. Around 261,000 jobs were added to the job market in October by American employers, defying the expectations of economists. This created a surplus of openings, with nearly two vacancies per job seeker. Employees emboldened by this turn of events even began to demand better conditions and higher wages from their employers.

The subjects of the recent layoffs however have not had time yet to make a significant impact on the weekly claims for unemployment benefits. The Fed’s last interest rate hikes to stabilize the economy seems to be holding the fort. Consumer retail sales boosted by 1.3% than September last month. As measured by the Producer Price Index and the consumer price index, inflation showed signs of easing in October.

The chief economist at Glassdoor, Aaron Terrazas, says, “There are a number of vulnerable local economies — Seattle, the Bay Area, Austin, Denver. In those communities, tech has been over-hiring. Those will feel the chill.” According to Julia Pollak, the chief economist at ZipRecruiter, “The occupation worst affected during Covid was low-wage service jobs in high-wage areas.