In a throwback to 2023, the tech industry kicked off the new year with another round of headline-grabbing layoffs. Many once high-flying tech firms have been left with bloated workforces that need trimming after near-zero interest rates and increased government spending helped spark a pandemic hiring boom.
That sounds scary—and, if you’re among the unlucky souls being laid off, it is. But most consumers and investors read far too much into splashy layoff headlines that won’t affect them, according to Bob Elliott, co-founder and CIO of the investment firm Unlimited. The reality is, at least for now, January’s layoffs are too small to put a dent into the otherwise thriving labor market.
“Anecdotal reports of tech layoffs are garbage information—garbage, garbage information,” Elliott told Fortune. “It’s important to contextualize them. People are talking about layoffs of 170 people; it’s irrelevant. Unless someone is talking about 100,000 layoffs, it’s just not a meaningful influence.”
The tech sector aside, Elliott and many of his peers believe the labor market as a whole remains robust. These economists and Wall Street money managers point to a raft of hard data to back up their point, from subdued initial jobless claims data to the still historically low 3.7% unemployment rate.
Wells Fargo’s chief economist, Jay Bryson, told Fortune that after years of struggling to find talent, most businesses are also doing everything they can to avoid layoffs. It’s a tactic that some economists call labor hoarding—and it could help the economy avoid a recession, Bryson said.
“If you talk to businesses, they’ll still complain about how difficult it is to get labor. And it’s been difficult for a few years,” he explained. “So even if orders are slowing a little bit…businesses are probably going to try to hold on to their people as long as they can, because they don’t want to have to let them go just to have to get them back later.”
Tech layoffs: anecdotes versus numbers
Before getting into the numbers that may provide some optimism, it’s important to note that many tech companies are tightening their belts, and have signaled that more layoffs are coming.
January has seen a flurry of familiar layoff announcements from tech leaders. Google’s parent company Alphabet followed up last year’s downsizing spree this month by cutting more than a thousand positions across multiple divisions, from advertising to YouTube. Amazon announced it will lay off hundreds of employees from its Prime Video and Amazon MGM Studios divisions, while its subsidiary Twitch said it would let go of 500 staff. And smaller tech companies haven’t avoided the carnage. The video game software company Unity Software revealed plans to slash 1,800 jobs, and the workplace solutions firm Xerox announced it would lay off roughly 3,000 employees in the first quarter of 2024.
But while these recent headlines often portray a dire situation for tech companies, Unlimited’s Elliott argues that the anecdotes need to be put in perspective.
He noted that between January and November of last year, on average, there were 1.6 million layoffs each month, recent Bureau of Labor Statistics data shows. Compare that to the roughly 7,800 tech industry layoffs seen through the first 18 days of 2024, according to data from the tech layoff tracker Layoffs.fyi, and tech companies’ problems begin to seem less daunting for the economy as a whole.
Add in even more context, and the tech layoffs don’t seem so bad at all—at least compared to last year. In 2023, 263,000 tech employees were let go. That’s an average of roughly 22,000 per month. Given that we’re already more than halfway through January, 2024’s monthly tech layoffs are actually on pace to decline compared to last year’s average.
All of this means tech layoff headlines can be misleading, portraying a more dire economic situation than the underlying data suggests—or, as Elliott put it, “My answer to the [tech layoff] anecdotes is that they suck.”
On top of that, at least one big tech executive has been fairly clear that layoffs at his company won’t be getting any worse after a rough 2023. After announcing plans to cut roughly 12,000 jobs last January, Sundar Pichai, CEO of Google parent Alphabet, sought to calm employee fears over his latest round of layoffs in an internal memo on Wednesday, the Verge first reported. While Pichai noted that more “role eliminations” are to come, he also said they won’t be “at the scale of last year’s reductions, and will not touch every team.”
The latest hard evidence of labor market resilience
Overall, despite the recent tech layoff headlines, experts believe the labor market remains on strong footing—and there’s hard data to back that up. Initial jobless claims, which represent the number of Americans filing for unemployment benefits each week, are perhaps the best evidence of the labor market’s strength, according to Unlimited’s Elliott.
“When people get laid off, they go file for unemployment,” he explained, adding that “there’s not a lot of indication of further weakness when you look at the initial claims data, which really is the best real-time indication of layoffs in the economy.”
There were just 187,000 initial filings for unemployment insurance for the week that ended Jan. 13, the U.S. Department of Labor reported Thursday—the lowest level since September 2022.
And after rising for much of last year, continuing claims, a rough indicator of the number of longer-term unemployed, also dropped by 26,000 to 1.8 million last week. “Continuing claims have been declining, potentially pointing to the hiring rate picking up somewhat,” Citi analyst Gisela Hoxha said in a Thursday note to clients.
Could labor hoarding help prevent a recession?
For now, the labor market is still performing, despite the scary stories about tech layoffs. And Jefferies’ senior economist Thomas Simons expects that to continue for a while, too—due, at least in part, to labor hoarding.
“Businesses have been extremely reticent to let go of workers that they struggled to find over the last 3 years,” he explained in a Thursday note. “We doubt that they will be able to hold on to everyone indefinitely, but they're going to try.”
Simons noted that there have even been signs that some tech companies are “opting to reassign workers from eliminated teams into other roles rather than let them go.”
That’s good news for more than the affected workers—Wells Fargo’s Bryson argued that employers' desire to hang onto talent could even help prevent a recession this year. Bryson recently revised his economic outlook for 2024. He previously forecast a mild recession, but now sees a soft landing—where inflation fades without a job-killing recession—due to the labor market’s strength over the past few months.
“It’s definitely one of the reasons why we ditched the recession call,” he told Fortune. “The labor market is not falling apart, and that's how you get to recessions. Spending slows enough that it causes layoffs, and then that leads to more slowing spending, which leads to more layoffs. And you get into this vicious circle. We're just not having that second part.”
Bryson argued that rising profit margins over the past few years are likely helping fend off a recession, and might enable employers to hang onto workers for longer as well.
“If you look at margins, profit growth with companies in general remains pretty good right now,” he said. “Nobody that I know is in a hurry to lay lots of people off at this point. It took them a long, long time to get that labor.”
