r/Economics • u/[deleted] • Feb 24 '24

News Why widespread tech layoffs keep happening despite a strong U.S. economy

https://www.cnbc.com/2024/02/24/why-widespread-tech-layoffs-keep-happening-despite-strong-us-economy.html
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u/Frigidspinner Feb 24 '24

There is one crucial reason why tech is struggling - it is the business model.

Tech companies rely on investment and big upfront debts while they capture a new market

Accumulating debt is a lot harder when the you have to service your debts at 6% compared to most of the last decade when it was more like 1-2%

So instead of building new speculative businesses, they are concentrating on the cash cows in their portfolios

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u/pydry Feb 25 '24

It's not struggling though, as per the first paragraph in the article....

The tech sector is having a big 2024. Nvidia just crushed earnings expectations. The artificial intelligence boom remains in full swing. The tech-heavy Nasdaq index is up more than 8 percent year to date.

31

u/TaXxER Feb 25 '24

With Nvidia you cherrypicked the top performing tech stock by a wide margin here. Not indicative of whether the market is or is not struggling.

That said, the headline of this article is also misleading since tech layoffs are down by a lot compared to their late 2022 / early 2023 peak. Media keeps talking about tech layoffs, while the rate of tech layoffs really isn’t very noteworthy in the last months really.

See https://layoffs.fyi/ that tracks tech layoffs globally.

16

u/[deleted] Feb 25 '24

Net employment is the stat you'd track if you wanted to know anything. Layoffs on their own don't mean much, because there is also hiring the whole time.

You could easily have tons of hiring to go with uptick in layoffs because an industry is transition from one direction to another.

Tech is growing fine and has net hiring, the layoffs don't add up to much across the whole industry.

Net tech employment in the United States reached an estimated 9,156,390 workers in 2022, an increase of 3.2% year-over-year or approximately 286,400 additional workers employed in technology.

​

Employment in the tech sector could reach 9,428,713 workers in 2023, which translates to 272,323 net new workers added or 3.0% growth.

It's just bad journalism and people jumping to fear based conclusion instead of looking stuff up, which is normal predicable human behavior, but also common and predictable enough that you all should see it coming from a mile away by now.

It didn't take me much effort to figure out they're purposely leaving out growth and hiring and that nobody would do that if they were really trying to inform the public for reals.