Employment News
How the U.S. had a record jobs report despite tech layoffs?
The January U.S. jobs report reported that 517k jobs were added despite the massive tech layoffs. So let me explain the puzzle.
Employers added 517,000 jobs in January 2023. As a result, the unemployment rate went down to 3.4%, the lowest level since 1969. This is despite the staggering tech layoffs the same month. It is crucial to understand that the U.S. jobs report covers all industries. For example, the Leisure and Hospitality sector topped the list by adding 128,000 jobs in January.
Department of Labor press release
Experts say that even though the tech sector brings in a big chunk of corporate earnings, it remains a small share of total employment. So why is the tech sector struggling while the other sectors are flourishing?
Fed rate hike
Inflation is currently cooling but was at its highest level in 40 years. As a result, the Federal Reserve started to raise interest rates. Naturally, this move made Wall Street anxious, and investors began to get more conservative by selling off tech stocks. Also, borrowing became more expensive. This made individuals and corporations reconsider their plans and forced them to enforce cost-cutting measures, earning losses and layoffs.
Loss of earnings
Customer demand during the pandemic started to dwindle as workers began to return to the office and children to schools. For example, Netflix lost 200,000 subscribers in the first quarter of 2022, and its shares plunged nearly 75%. Zoom, a videoconferencing platform, went into a hiring frenzy to meet the unprecedented demand during the pandemic. However, the company lost its steam after the government relaxed the COVID restrictions. Due to this, companies were routinely underperforming in each quarterly earnings call.
China economy slowdown
China imposed a “zero Covid” policy to limit the pandemic spread. But unfortunately, this caused the country to be at a standstill. As a result, the country’s economy nosedived. Many tech companies that relied on them to deliver suffered delays without any timelines. For example, Apple’s iPhone 14 models are delayed, and the company has already started to shift iPhone production to India and Vietnam as a backup to meet such disruptions. Until these new production plants ramp up, Apple will suffer from delays.
Strong U.S. Dollar
The U.S. dollar is stronger than ever. This should be welcome news for companies operating in the US. The imports will be cheaper, and so is the travel abroad. On the flip side, US companies with a presence abroad will suffer if most of their revenue is driven by overseas operations. For example, McDonald’s reported a decrease in revenue and net income due to foreign currency exchange rates.
I hope you find this post insightful. Please let me know your opinions in the comments. If you enjoyed reading my post, clap, and if you want to hear more from me, follow. Thank you!
