Tech industry considered ‘the place to be if you want to get rich,’ economist says

ZipRecruiter Chief Economist Julia Pollak joins Yahoo Finance Live to discuss the November jobs report, hiring and layoffs in the tech sector, wage growth, and the outlook for the labor market.

Video Transcript

AKIKO FUJITA: Well, as we continue on with our coverage of jobs data, ZipRecruiter is tracking the latest trends among various industries. For more, we welcome in ZipRecruiter chief economist, Julia Pollak. Julia, I want to ask you first about the average hourly earnings because that's sort of the number that really stood out to me when you look at the increase, 5.1% year on year, but we also saw upwards revisions for September, as well as October. What does that tell you about just how much slack is still in the labor market right now?

JULIA POLLAK: So past reports that suggested that wage growth was cooling now does not seem to be the case. And there are reasons to believe that wage growth pressures will remain high for the foreseeable future. One, we still have a very tight labor market where people are leaving the labor force, not coming back. And despite huge gains in participation among younger workers, those are being more than offset by declines among working age people and older workers.

Then we've also had 20 months of very rapid wage growth, which have set expectations among job seekers. We just did a survey of people hired in the last six months, and 43% of them got double digit wage increases. 27% of them got a signing bonus. Those are unprecedented numbers, and those are setting expectations among job seekers.

RACHELLE AKUFFO: And it's interesting because on the one hand, you have this very strong jobs data, but then your data also shows that job seeker sentiment weakened in November. You would think that the employees would be in good shape or prospective workers. Why are we seeing that difference?

JULIA POLLAK: Well, the tech layoffs are having an outsized effect on the sentiment of job seekers and their confidence for two reasons. One, they're hogging the headlines, but two, only 4% of job seekers are currently employed in tech, but 20% are looking for jobs in tech.

The tech industry still is very much tied to our aspirations as Americans. This is the place to be if you want to get rich. It's the place where great innovations are taking place, where the consumer items that we most want to purchase are being designed and developed, Apple Watches and things like that. So this is still very much kind of the industry that dictates our moods.

AKIKO FUJITA: So where are those who lost jobs in some of those companies we just showed, where are they going? Is there enough openings still within the tech sector to support those who've lost jobs from these major tech firms?

JULIA POLLAK: That's what today's numbers out from the Bureau of Labor statistics suggest. So in the techiest industries in the Bureau of Labor Statistics data-- that's computer systems, design-related services, and software publishing-- we saw a gain in computer systems design and only a very, very small loss, 1,400 job losses, in software publishing. That's despite announcements of 20,000 layoffs in October and 40+ thousand layoffs in tech in November.

And so those numbers are not showing up in the aggregate data, which suggests that those losses are being offset by gains elsewhere. There are still many, many tech companies that are doing very well, that are beating expectations on the Street with each of their earnings reports, and that are hiring, and that the minute there's a big layoff announcement, are going and pulling that spreadsheet listing all of the workers who've been laid off and having the recruiters reach out to them one by one.

AKIKO FUJITA: The other sector that we saw see huge gains today, leisure and hospitality adding 88,000 jobs in the month. This is, of course, the sector that was hardest hit at the height of COVID, leading to questions about whether, in fact, we'd get back to those levels. What does that number today tell you about how far along we are in that recovery in that sector?

JULIA POLLAK: So personal income has recently risen by a lot, not just because people are gaining jobs and labor market income, but also because of a boost from these inflation relief stimulus checks that many states are sending out. And that has fueled strong consumer spending on in-person services, where employment levels are still well below pre-pandemic strength and have a way to go to recover.

That recovery is taking place because even as businesses say, hey, maybe we need to pull back hiring in case there's a downturn, they're not seeing that downturn. Customers are banging down the doors. We saw everyone try to get Taylor Swift concert tickets. And that means that employers are saying, we can reduce hiring another day.

For now, we need to make sure we have enough people manning those concession stands at that concert. We need to make sure we've got enough security guards. We need to make sure that we don't leave money on the table by canceling purchases and orders. So that's what's happening. People are hiring in huge numbers to meet the immediate business need that they're facing.

RACHELLE AKUFFO: Certainly don't want any angry Taylor Swift fans. A big thank you to Julia Pollak there, ZipRecruiter chief economist. Have a great weekend.