Tech hiring is slowing — this chart explains how and why
What does the tech job market look like? Unfortunately, not very well.
Tech hiring fell after the Federal Reserve began aggressively hiking interest rates earlier this year, a new analysis from ZipRecruiter suggests. The Fed has raised rates six times this year, including four 0.75-percentage-point hikes in the key rate since June. This pushed the short-term borrowing rate to a target range of 3.75% to 4%, making car loans and credit card debt more expensive. It also makes it harder for high-growth stocks to deliver growth at the same rate as in previous years.
The Fed’s actions have made things more difficult for the interest-rate-sensitive technology sector, said Julia Pollak, chief economist at ZipRecruiter, a job search engine. The high interest rate environment has made borrowing more expensive, and a strong dollar has eroded the value of income from foreign markets. Furthermore, high-growth tech stocks are vulnerable to rising interest rates, which lowers the value of future earnings. Shares of Facebook parent Meta Platforms Inc. GOALS,
Google parent Alphabet Inc. GOOGLE,
Amazon.com Inc. AMZN,
and Microsoft MSFT,
all suffered after a string of earnings disappointments on Wall Street.
The number of job postings for technology sector jobs on ZipRecruiter peaked in May with more than 1.9 million jobs, up 87% from February 2020 before the coronavirus outbreak was declared a pandemic. But hiring began to decline in June around the same time as the Fed’s first 75 basis point hike (one basis point is equal to one hundredth of a percentage point, or 1% of 1%). In October, the number of job postings for tech jobs fell to 1.3 million.
Employers are seeking to fill fewer entry-level tech roles. On Nov. 15, only 2.7% of active job postings for data engineers on ZipRecruiter are seeking “junior,” “entry-level” or “level I” candidates. Demand is even lower for enterprise resource development engineers (1.6%), software developers (1.2%), software engineers (0.8%) and systems engineers (1.8%). Instead, the vast majority of active job postings in those roles seek “mid-level” or “level II” candidates — 71% of software-developer job postings and 48.6% of software engineers.
The current trend is deviating from normal times and from other non-tech roles as tech companies – in an effort to cut costs and prepare for a possible recession – appear less willing to spend time on training and onboarding new staff, Pollak told MarketWatch. In normal times, job searches are often pyramid-shaped, with the most senior roles at the top of the pyramid, Pollak said. Employers tend to look for younger workers, because they are cheaper, and there are fewer managers and intermediate staff.
Consumers also feel uncertain about the economic outlook, according to the Federal Reserve Bank of New York’s consumer expectations survey released this month. The share of people expecting higher jobless rates a year from now hit a high not seen since April 2020. Consumer sentiment was also lower than expected in November, according to the latest US Consumer outlook of the University of Michigan. These reports, along with a series of hiring freezes and layoffs in the tech sector, added to the drumbeat of recession.
There has been a wave of layoff news in Silicon Valley in recent weeks. Amazon may lay off about 10,000 workers, representing about 3% of its corporate staff, according to the Wall Street Journal. Facebook parent Meta recently said it was cutting 11,000 employees, or about 13% of its workforce, in the first layoffs in the company’s 18-year history. Tesla founder Elon Musk, who recently bought Twitter for $44 billion, quickly launched an effort to cut costs at the unprofitable company; which includes 7,500 layoffs worldwide, or 50% of its global workforce.
(Andrew Keshner contributed to this story.)