There are some concerning rumours on the grapevine.
Have you heard them?
After reports have revealed that technology organisations across the US are reducing recruitment activity and making layoffs, experts are understandably concerned about the health of our market.
Twilio announced a plan to reduce its workforce by 11%.
Patreon is cutting 17% of its workforce.
Snapchat is laying off 20% of its 6,400 employees.
Even global - highly profitable - brands like Microsoft, Tesla, and Twitter have reported a series of redundancies in the past few months.
Why? Well, that’s the big question.
The state of the US technology sector
Despite today’s troubling turn of events, the technology sector in the US (and New York in particular) has frequently made headlines over the last few years.
Businesses have been growing at an unprecedented rate, creating an attractive job market and a positive future for employees.
This hasn’t changed.
As of today, 80% of firms are reporting double-digit growth year-on-year (Source: Global Data) and the technology sector is still dominating the global investment market. The future of the industry is still looking strong.
American technology start-ups have recently raised $148.75 billion.
The US is receiving 49.3% of the global industry investment pledged this year.
Over 100,000 deals have been made with investors since 2019.
As a result, we can conclude that businesses shouldn’t be making layoffs out of financial necessity - such as the impending recession. There are other factors at play.
Is the US technology sector facing uncertainty?
As it stands, it’s hard to say whether the layoffs are indicating an impending downturn in market growth.
Do these firms know something we don’t?
On this matter, CrunchBase wrote:
“The public markets have been hit hard in 2022 and that’s trickled down to the private markets.
Inflation concerns, rising interest rates and geopolitical issues have all contributed to a roller-coaster stock market.
Startups—especially those that benefited from a pandemic boom that’s starting to cool—are feeling the pressure too.
Valuations, particularly at the late stage, have started to dip, and startups say it’s much more difficult to raise new funding in this environment.”
However, with a continued CAGR of 6.38% (Source: Statista), a drive to “protect their bottom line” can’t be the only reason organisations are suddenly making such drastic decisions.
4 unobvious reasons behind technology’s fall in recruitment activity
Xcede’s research has revealed that the drop in recruitment activity and the rise in layoffs has very little to do with market uncertainty.
In fact, the global recession on the horizon is just one small part of the reasons leaders are changing their HR processes.
The nationwide movement of “The Great Resignation” has urged businesses to:
Care for the needs of staff members.
Promote employee wellbeing.
Support mental health and combat stress levels.
This has had outstanding results on talent retention efforts.
Job satisfaction is on the rise across the United States, causing a fall in the number of open positions.
Isn’t data incredible?
A newfound ability to track employee performance metrics has allowed firms to seize control of their business development.
We found that, in some instances where organisations are letting staff members go, it’s not because of a lack of ability to pay that person.
Rather, it’s because leaders aren’t willing to settle for low-performing talent - being more proactive about removing anyone that isn’t up to standard.
We can all agree that the last few years have been intense.
Panicked technology organisations committed themselves to aggressive hiring processes over the course of the pandemic, only to discover that they couldn’t possibly grow their business operations at the same rate they were onboarding staff.
Therefore, even though they aren’t necessarily facing a decline, it will be a while before they need the staff members they’ve recruited; encouraging them to make layoffs.
Of course, we can’t discuss the state of the US technology job market without at least acknowledging the impact of automation.
Tasks that used to take hours of lengthy administration now require very little human input, freeing up workloads and enabling employees to be more productive with their time.
As a result, teams can be smaller.
Our forecast for the US technology sector
There’s no reason to believe that our sector is facing an unrecoverable decline.
Although the statistics might look concerning at face value, they actually signify the start of some positive trends in our market.
We expect that, throughout 2022, recruitment and HR processes will continue to evolve.
Companies are going to be diligent in selecting employees that will support their long-term goals (rather than rushing to fill roles as soon as possible).
This is a sustainable attitude that will serve leaders well in the coming years… especially as skill gaps continue to grow.
Recruit with Xcede
Xcede are global technology recruitment specialists, sourcing employees for a range of dynamic job positions.
Our dedication to finding experienced candidates with the right qualifications allows businesses to foster growth and continue scaling. Get in touch today.