Decoding the tech sector layoffs
From the news headlines, one might think that this is a terrible time to be a tech worker as notices of layoffs continue to mount in the sector. That the layoffs are occurring at very high-profile tech companies—companies that usually appear in news stories touting their growth and expansion—has raised concerns that perhaps the labor market, and therefore the US economy, might be more fragile than generally thought. However, when these layoffs are considered relative to the regular churn that is always happening, they do not appear to be quite so ominous.
Tech workers are not just employed by the large tech firms featured in the news reports; they also work in industries throughout the economy. Despite the headlines, overall demand for workers in tech occupations remains high, according to recent data.1 And while some of the most notable of the announced layoffs comprise a sizable share of the total employment of the firms doing the layoffs, they are not large relative to the size of the US labor force; specifically, they are not large relative to the usual level of monthly churn of quits and layoffs.
If we switch the focus from “tech sector” to industries that employ the highest proportion of tech workers, we do see some slowing in employment. However, it is too soon to tell if this slowing is coming from the tech-occupation portion of their workforces or from other types of occupations. Overall, we do expect the pace of job creation to eventually slow down so that employment increases more closely match growth in the labor force going forward. However, with the number of job openings still high, quit rates running well above prepandemic levels, and layoffs running well below, there are no signs yet that rising unemployment will soon be an issue.
Defining tech
“Tech workforce” and “tech sector” are commonly used terms, but they do not line up well with how government occupational and employment data are organized. In another Economics Spotlight article, The tech workforce is expanding—and changing—as different sectors battle for talent, Deloitte economist Akrur Barua pulled together a grouping of six occupations and suboccupations from the Bureau of Labor Statistics’ (BLS) Occupational Employment and Wage Statistics to define the tech workforce. Based on that framework, about 80% of the tech workforce falls into the single occupational category of computer and mathematical science—a fortunate occurrence since that is the only series for which we have current data.
In the press, many discussions of tech layoffs focus on announcements by a few specific companies generally thought of as “Big Tech.” Using press releases, one could arrive at an estimate of the number of layoffs in the tech sector—however one chooses to define it—over the past year. But that focus on actions taken by specific firms does not reveal much about overall demand for tech workers. Tech workers are employed, in varying degrees, in every sector of the economy.
As shown in figure 1, although employment growth in computer and mathematical science occupations slowed during the pandemic, it resumed its upward trend starting mid-2021. And growth has continued throughout the most recent period, which includes high-profile layoffs. In terms of the size of some of the announced layoffs, they are small relative to the 6.5 million employed in this subset of the tech workforce,2 even if they are large relative to the individual firm’s total employment.
