The latest jobs report from the U.S. Bureau of Labor Statistics has sparked a sense of déjà vu in the world of economics. Economists find themselves fielding the same age-old questions year after year: Will there be a recession? Why are tech companies laying off workers? Will the Federal Reserve change interest rates? Let’s reiterate some timeless truths and contextualize them with recent data.
Tech Sector ≠ Entire Economy
The tech sector is not synonymous with the entire economy. Despite the recent layoffs in well-known tech companies, tech professionals can find opportunities in various industries. For instance, industries like Manufacturing, Finance, and Healthcare are among the top employers of IT occupations, as highlighted in SkyHive's data. While these layoffs may be painful for those affected, they often find new and promising opportunities.
Let’s distinguish between large tech companies and the broader tech industry. The latest jobs report, published last Friday, revealed that the Information and Professional and Business Services sectors, where many tech companies fall, experienced an increase in total jobs of 15,000 and 74,000, respectively. Layoffs at some large tech firms may be attributed to an over-hiring spree during the COVID-19 surge, which subsequently proved unsustainable.
January Layoffs: A Regular Occurrence
January consistently brings more layoffs. Companies align year-end performance evaluations with strategic shifts at the start of the year. Some layoffs may be performance-based, but employee performance isn't always the sole factor. On the flip side, companies may realign their strategic focus due to changing market conditions. Both events tend to cluster in January, as indicated by the data.
Strong Economy Despite January Trends
Even considering the January data, the overall economic outlook remains favorable. For example, tech layoffs in January 2023 were three times higher than those in January 2024, a time when recession predictions were rife. However, the labor market in 2023 defied these pessimistic forecasts, demonstrating resilience and strength (graph from Layoffs.fyi).
Additionally, the most recent employment reports, including the Employment Situation and Job Openings and Labor Turnover Survey, reveal a robust labor market. In January, the economy added 353,000 jobs, maintaining an unchanged unemployment rate at 3.7 percent. Additionally, December saw a surge of 101,000 job openings. These numbers indicate a strong and vibrant labor market.
The Fed's Watchful Eye
Speculation abounds regarding the Federal Reserve's next move, particularly when it comes to interest rates. However, the Fed reacts to economic data, much like the rest of us. There is no rigid strategy set in stone. Recent data, including a 3.4 percent annual rate for the Consumer Price Index in December, above expectations, suggests that inflation remains a concern. The labor market's robust performance, coupled with a low and stable unemployment rate, provides no immediate motivation for the Fed to decrease interest rates.
Outlook for 2024
Based on the latest labor market data, a recession may not be on the horizon for 2024. In fact, most economic indicators point to a significantly stronger economy compared to 2023.
The recurring questions about the labor market often find answers in the persistence of certain trends and the interpretation of the latest data. The current economic landscape suggests that the labor market remains resilient and robust, with no impending recession insight.
Compiled by Bledi Taska, VP, Head of Analytics, at SkyHive
SkyHive is a Certified B Corporation that uses ethical artificial intelligence to drive global reskilling initiatives and create a more inclusive labor economy. Our products are designed to rapidly reskill people and help organizations and communities prepare for the future of work.
SkyHive was named one of the “Next Big Technologies Working for Social Good in 2023” by Fast Company, and a World Economic Forum Global Innovator.
Leading enterprises and innovative government organizations use SkyHive’s cloud-based applications, Human Capital Operating System™, and SkyHive’s Quantum Labor Analysis® to power the future of work at its most granular level: skills. In addition, SkyHive has been recognized by the World Economic Forum, GPAI, RAII, and others for leading efforts in ethical AI and its positive impact on labor economies worldwide.