Massive layoffs — at a pace nearing the early days of the COVID-19 pandemic — have rocked the workforce as the global economy inches toward recession. Within weeks, Twitter, Meta, Salesforce, Goldman Sachs, Amazon and other high-profile companies have laid off thousands of staff as businesses scramble to get ahead.
Small businesses also joined the layoff bandwagon with 15% of employers dismissing workers in December 2022, up from 8 percent the month prior. An average of 74 percent of employers have also instituted hiring freezes, citing rising inflation and labor costs, higher interest rates, reduced revenues, and fears of an impending recession. Still, despite the flurry of firings, some industries are safer than others.
While it’s hard to quantify the exact number of layoffs in each sector in recent months, data from the U.S. Bureau of Labor and Statistics shows 1.4 million people were laid off in November 2022 alone.
Challenger’s Job Cuts in 2022 report found that the technology industry leads the layoff pack, as companies grapple with falling valuations, dipping stock prices and lower funding rounds. Layoffs.fyi, a crowdsourced database that’s been tracking tech layoffs since the pandemic, reported that more than 154,000 tech workers were laid off in 2022 — mostly in November. That includes employees at tech majors like Intel, HP and Microsoft Corp.
But the reductions aren’t entirely in the tech sector. Several other industries were affected by layoffs, including finance (Citigroup, Morgan Stanley) and FinTech, media (CNN, Netflix), trade, transportation, automotive, healthcare/product manufacturing, utilities, leisure and hospitality, real estate, and construction.
There are no signs of the job cut trend slowing down. In 2023, an estimated 6 in 10 companies are likely to enact layoffs, affecting 30 percent or more of the workforce. So, who is most at risk for future layoffs?
LinkedIn’s Workforce Confidence Index captured the anxiety levels among workers and the specific roles they hold. About 31 percent of the 5,000 U.S. survey participants worry their employer plans to enact layoffs and budget cuts, particularly in roles closely associated with new product rollouts. These include:
These figures coincide with Revelio Labs’ findings, which show many job cuts — particularly in Big Tech firms — happened in talent recruiting, sourcing and marketing roles.
“The majority of laid-off workers either have highly compensated roles or are entry-level recruits,” said John Willis, founder of Convert Free and senior software developer. “Waves of layoffs crushed workers in retail, recreation and tourism at the onset of the pandemic. Since there are fewer of those workers available as the pandemic subsides, higher-paid workers are suddenly the ones receiving layoff notices. The IT industry is leading the reductions.”
The tech industry is leading the way when it comes to layoffs, though firings are now economy-wide. The workers who feel most at-risk include those in product management, quality assurance, marketing, finance, and IT roles.
Although layoffs are getting a lot of attention and raising anxiety levels for many, LinkedIn’s Workforce Confidence Index report shows they don’t represent the overall job market. In other words, not all workers are feeling the layoff jitters equally.
Professionals with the least stress about getting laid off are those categorized as problem-solvers in fields, such as:
Workers in the tech and finance industries are the hardest hit by the ongoing massive layoffs, particularly those in roles associated with new product rollouts.
Despite the cuts, the overall economy is still creating jobs with the labor market boasting roughly 10.5 million job openings and 6.1 million hires. However, while the overall job market remains resilient, companies are still actively planning for a downturn.
JP Morgan Chase’s 2023 Business Leaders Outlook survey found that 65 percent of midsize business leaders in the U.S. expect a recession in 2023. An overwhelming 91 percent of the leaders decry rising costs as inflation bites, with 51 percent thinking it’ll get worse now that the midterm elections have passed. Only 8 percent are optimistic about the global economy in 2023, compared to 34 percent in 2022.
NFIB’s Small Business Optimism Index shows 32 percent of small business owners cite inflation as the single most important problem in operating their business. Other factors include the dramatic interest rate hikes and rising input costs (supplies, inventory, energy and labor).
Despite their negative views on the economy, though, most business leaders expect to retain or even add staff in 2023. About 65 percent of leaders are still optimistic about their own companies’ performances despite the bleak economic outlook, and 88 percent expect to add or keep their employees. About 86 percent from JP Morgan Chase’s survey are bullish about their revenues, while 76 percent expect to increase or maintain their capital expenditures.
Although small businesses are not optimistic about the economic outlook, they are confident their businesses will continue to grow — some even plan on hiring additional employees.
Traditionally, employers resort to budget and job cuts during recessions to save money. However, layoffs have detrimental long-run costs, including tarnishing a company’s reputation, creating knowledge gaps, lowering employee engagement and customer retention levels, and diminishing trust among workers and customers.
“Our team of employees is the lifeblood of our business, and we’ll run a loss before laying anyone off,” said Carlson Lang, cofounder & COO, Test Prep Insight. “Other small businesses might not have that luxury, but to the extent you can weather the storm and keep people employed, I believe you’ll be better off for it in the long run. This recession may last less than a year, and you don’t want to be scrambling for talent at the same time everyone else is when this is over.”
Like Lang and the 90 percent of midsize business leaders who expect to hire new staff or keep their current teams, small business owners can potentially avoid layoffs by:
Lincoln Electric requires employees to accept flexible assignments — including one with a lower salary — and work extra or shorter hours depending on demand. When orders fell during the Great Recession, the company avoided layoffs by moving some factory workers into sales.
No layoff is good, but sometimes they’re necessary if you want your business to survive. The goal is to let workers go as painlessly as possible and avoid public blowback. Some steps you can take include:
Layoffs are always bad news for everyone involved. Consider all your options thoroughly to ensure you exhaust all alternatives before laying off staff. That way, you can make the process easier on everyone while ensuring your leadership and business experience the least damage possible.