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Columns | Go Far With Kovar

Tech Layoffs:
Normal or Scary?

by Taylor Kovar

April 11, 2023

Hi Taylor - Is it just me, or have tech companies been on a firing spree lately? I keep reading about these massive layoffs, but at the same time, I feel like I'm seeing reports of the US adding jobs each month. What's happening?

Hi Daren - No, it's not just you, unfortunately. I think the tech giants have laid off something like 150,000 people in the last six months, and the number has probably gone up since I saw that figure. It does seem contrary to the reports of job growth, but it's a good reminder that different sectors work in different ways. Here are some of the key takeaways.

1. Natural ebb and flow. Tech is an ever-growing portion of the economy, but the growth is rarely linear. After the dot com boom in the early 2000s, a ton of people lost fortunes and countless companies went belly up, even though the business of the internet was just getting started. Right now, it seems like AI is driving a pretty big shift and that's undoubtedly leading to some automation and layoffs. In the meantime, I'd bet AI developers will be getting hired in waves for the next few years. In addition, there was a lot of hiring done during the pandemic when remote work was expanding, so a lot of these cuts are simply a return to pre-Covid numbers.

2. Economic woes.
It's a funny time for the economy, in that jobs are being added and industries are growing while inflation is still high and global growth is somewhat stagnant. While Google and Microsoft and Twitter are all based in the US, their product is universal and affected by industries in all countries. To make up for shrinking margins, corporations will make cuts and slow hiring, which leads to less need for HR staff and even more cuts. It's a fairly natural cycle that isn't particularly surprising, especially for companies with so many thousands of employees.

3. Adapt or die.
It's always alarming to see layoffs of this magnitude, but it's also the nature of this particular beast. IBM cut 60,000 jobs back in the 1990s. AT&T cut 40,000 around the same time. Both companies are still around and have lots and lots of employees. Innovation is often the driving force behind these changes, meaning new jobs will be created to accommodate the new technologies. In some cases, the only way for these companies to keep growing and producing is to cut their workforce to free up capital for realignment.

My hope is that the latest layoffs are more about a shift in strategy than a prolonged downturn for the tech industry. Time will tell, but history has shown these companies to be pretty resilient. Thanks for the question, Daren!

Taylor Kovar

"Go Far With Kovar" April 11, 2023 Column


Legal Disclaimer: Information presented is for educational purposes only and is not an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. To submit a question to be answered in this column, please send it via email to Question@GoFarWithKovar.com, or via USPS to Taylor Kovar, 415 S 1st St, Suite 300, Lufkin, TX 75901.

 

 

 

 

 

 

 

 

 

 

 

 


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