At the start of the pandemic, waves of layoffs hit retail, leisure and hospitality workers, anyone whose job relied on in-person interactions.
But now that the pandemic is waning, the supply of those workers is less, and now, it’s the highest-paid employees who are on the receiving end of layoff announcements.
Leading the cuts is the technology sector. On Wednesday, Amazon announced that it would lay off 18,000 workers. That follows a total of 16,193 tech job losses in December, according to data from consultancy Challenger, Gray and Christmas.
But while layoffs in the tech sector have largely captured the headlines, it’s far from the only industry facing job losses.
Other brand firms that have announced job cuts or hiring freezes in recent months, according to a list compiled by Reuters: Citigroup, Intel, HP, Microsoft, Johnson & Johnson, Phillips 66, and Walt Disney Co.
It has the makings of a «white collar» recession. November employment data from the US Bureau of Labor Statistics showed significantly slower hiring or absolute job declines across a range of white collar industries. In particular, professional and business services hiring has slowed for four of the past five months, and in November the sector saw just 6,000 jobs created nationally, the second-highest jobs added in this phase of the pandemic.
Other sectors that experienced significant drops in hiring in November included employment services jobs; administrative support functions; and some loans and other credit-related occupations.
On the other hand, the demand for workers whose jobs were endangered by the pandemic is back with a vengeance. That’s why food service jobs, as well as positions in hotels and retail stores, have seen significant wage increases, though in many cases they still aren’t big enough to keep up with inflation.
«What we’ve seen is massive hiring in the technology sector, huge hiring in recent years in the service-producing sectors,» said James Knightley, chief international economist at financial services firm ING. «And now, with recession risk or growing concern, some of these companies may have overextended themselves during the vibrant post-pandemic reopening, and are now facing more uncertainty.»
On Friday, the Bureau of Labor Statistics will release official employment data for December. Analysts are forecasting a total of 200,000 added jobs, up from 260,000 in November.
overexpansion
In 2022, employers announced plans to cut 363,824 jobs, up 13% from the 321,970 cuts announced in 2021, according to Challenger.
The technology industry accounted for more than a quarter of the total job cuts last year, Challenger data shows. More than two-thirds of the 2022 tech job cuts were announced in November and December alone.
«The technology sector was special. They overexpanded and overhired,» said William Lee, chief economist at the Milken Institute, a nonprofit, nonpartisan think tank. «They thought their ad revenue would go on forever, and once they started cutting back in the post-pandemic era, they said, ‘My God, we have too many people.'»
Other white-collar industries are now being hit with cuts, especially in interest rate-sensitive sectors like finance, real estate and auto, Challenger data shows. That’s largely due to the Federal Reserve’s aggressive rate-hike campaign to combat inflation that hovered near 8% for much of 2022.
The financial industry announced 24,437 job cuts last year, up from 10,784 in 2021, an increase of 127% according to Challenger data.
Financial firms across the board have announced cuts in their investment banking divisions as trading has slowed, according to Andy Challenger, Challenger’s head of sales and media. In November Bloomberg reported that Citigroup planned to cut dozens of jobs in its investment banking division, while Reuters reported Morgan Stanley was also planning a new round of layoffs. Those announcements follow similar ones made by Goldman Sachs in September and Deutsche Bank in October.
The auto industry saw 30,912 announced job cuts, compared to 10,469 in 2021. And the real estate sector had 8,074 announced cuts last year, compared to 2,762 in 2021.
«As interest rates rise, Americans are spending less on big-ticket items,» Challenger said. «We’ve seen a lot of job cuts around mortgage origination and fintech companies in mortgages. And then also on the housing side, real estate agents — cuts in finding, buying and selling property.»
Other firms have invoked the slowdown in the global economy to signal imminent cuts. In October, Johnson & Johnson said it would seek to «right size» its business amid inflationary pressures and a stronger US dollar.
“We are looking to make sure that our resources are deployed on those projects, those initiatives, those services that really add the most value to our business,” J&J CFO Joseph Wolk told Reuters.
Two energy companies, Phillips 66 and Chesapeake Energy Corp., are also cutting jobs, including some corporate positions. Reuters reported that the cuts at Phillips 66 would affect «salaried employees in management and upper-level technical service workers in several locations,» while those at Chesapeake would affect its geologists and geoscientists.
ING’s Challenger and Knightley suggest we could still be at the start of job cuts given the slowdown in the economy. US-based employers announced 76,835 cuts in November alone, more than double the 33,843 cuts announced in October and four times the number of cuts announced last November, Challenger data shows. Job loss announcements for December were down slightly for the month, to 43,651, Challenger said.
“I think we’re kind of at the beginning: we just came out of the last two years as the lowest layoff period in American history,” Challenger added. “We had such a severe labor shortage, and now with the Fed raising rates, that affects all industries.”
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«The Fed says unemployment could go as high as 4.4% or 4.5%, which translates to about 1.2 million Americans losing their jobs,» Knightley said. «And that’s when they said there wouldn’t be a recession, so we could see more Americans lose their jobs.»
Knightley said the bursting of the tech bubble more than 20 years ago, which had economic conditions similar to today’s, caused some 2 million Americans to lose their jobs.
«That might be the order we’re talking about in terms of this downturn, but with more of a focus on white-collar areas than manufacturing, where there’s still a real shortage,» Knightley said.
Outdated jobs?
A college degree remains the best predictor of employment: As of November, the unemployment rate stood at 2% for workers age 25 and older with bachelor’s degrees or higher, compared to the national rate of 3.7 %. Even for workers 25 and older with only a little higher education, the unemployment rate remains low at 3.2%.
But a different measure of the US employment situation, the overall labor force, reveals a more troubling pattern. The size of the labor force composed of college graduates over 25 years old has fallen for three consecutive months after peaking at 63.7 million, which equates to losses of 648,000 workers who are no longer looking for work if they find themselves without work.
That is the largest sustained loss since the start of the pandemic.
For those who only have some college educationThe situation is even more dire: the pandemic has caused the workforce to shrink by 1.5 million workers to a total of 35.9 million, and is now at a level not seen since April 2007.
«I think looking at middle management positions, that’s what we think they are, could have caused a lot of stress for those managers,» said Jane Oates, president of WorkingNation, a nonprofit focused on workforce development. . «They could be taking a break to reduce stress.»
These trends may speak to economic challenges more structural than slowing economic growth, experts say.
«Companies are starting to reshape their businesses,» said Lee of the Milken Institute. “They want to be more profitable for these times when labor is scarce and expensive, so they are incorporating more technology.”