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What lies ahead for the tech sector after all these layoffs

Salesforce (CRM) has joined a now long list of companies that announced layoffs in the tech sector. According to data from Layoffs.fyi, the announcement brings the total number of layoffs in the tech sector 24,000 so far in 2024. Should others in the tech industry take this as a sign of things to come?

University of Michigan's Ford School Professor of Public Policy and Economics Betsey Stevenson joins Yahoo Finance to discuss the status of the labor trends in large tech companies.

Stevenson puts the current market in historical context, reminding that the tech sector over hired during the pandemic.

"It's obviously not as booming as a labor market as it was... a year and a half ago, but the question will be, is this tech sector a canary in the coal mine? Or is this more re-allocation to places where we need people more than we need them in the tech sector?" Stevenson states. "I think we do still have a healing economy, so I feel very confident that people are going to be reabsorbed into other parts of the labor market."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

- Salesforce, the latest tech giant, to join the list of companies announcing layoffs this year. More than 23,000 tech workers have been laid off thus far in 2024. It's the most since March of 2023. That, according to data from Layoffs.fyi.

Here with what, if anything, this signals for the labor market, we're welcoming in Betsey Stevenson, professor of public policy and economics at the University of Michigan. Betsey, it's great to see you. As we try to sort of decipher where the labor market is now and where it's going, how should we read these public layoff announcements when we're trying to extrapolate what's going on under the surface?

BETSEY STEVENSON: You know, I think it's incredibly difficult to look at a single company or even a handful of companies layoff notices and make-- draw conclusions about the broader economy. Let's step back and put it in perspective. Every single week in a booming economy like we've had, roughly 200,000 people lose their job and are able to file for the very first time for unemployment insurance.

So the numbers you're talking about are still small. And relative to that 200,000, to give you another way to put it in perspective, every month, about a million and a half people are laid off in the US economy when the US economy is doing well.

So in a normal economy, we have a lot of movement. And in fact, that's actually one of the strengths of the US economy, that there are people who get new jobs. There's new opportunities. You know, there's 8 million jobs open right now.

So there's a lot of opportunities out there. And then when things aren't working out, when you realize you have too many people when the-- you know, whatever business you have tried to expand into, it's just not going as well, you cut back. That's certainly hard on individual people. And I have like anyone empathy for the people who've actually got those pink slips who lose their job.

But it is very difficult to say that this is some kind of Warning sign for the economy. In order for us to conclude there's a warning sign, I think we're going to want to see the broader numbers, those aggregate numbers starting to move.

- It sounds like Betsey-- I have heard some folks kind of question-- they see these headlines, Betsey, about these tech layoffs. They do wonder whether that's a kind of tell. Is that a kind of canary in the coal mine for the broader labor market? It doesn't sound, though, like you see it that way.

BETSEY STEVENSON: For sure, there are people who are like, is this the canary in the coal mine? Should we be looking at this as, you know, more to come? I-- you know, the-- those initial unemployment insurance claims, they come out every week.

So we're not lagging behind in that data. What we saw during the pandemic was the tech sector hired more than anyone else. They really got ahead of their skis. We've already been through one round of, whoa, the tech sector is laying a bunch of people off, what does this mean for the broader economy.

Turned out it meant nothing bad for the broader economy. It meant a healing economy, which was reallocating people away from a bloated tech sector towards sectors that were struggling to hire people who were in demand. I think that's the open question right now.

There's still a lot of hiring out there. It's, obviously, not as booming of a labor market as it was, you know, a year and a half ago. But the question will be, is this tech sector a canary in the coal mine? Or is this more reallocation to places where we need people more than we need them in the tech sector?

I think we do still have a healing economy. So I feel very confident that people are going to be reabsorbed into other parts of the labor market. But there is a difference right now. We are in a normalizing, slowing labor market.

And for certain people who are experiencing layoffs are not going to find it as easy to get a job that is as well paying or as good as what they had before. And that's going to mean people are feeling some pain.

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