(Yicai Global) Dec. 7 -- Recently announced staff redundancies at big technology companies based in Silicon Valley, such as Meta, Amazon, Google, and Apple, do not reflect the broader US labor market, according to analysts. 

The wave of layoffs in the US high-tech and innovation hub is mainly due to the tech sector’s own problems and does not reflect a wider trend in the jobs market, Goldman Sachs and Morgan Stanley said in new reports.

The two investment banks believe the US labor market will slow in coming months and be characterised more by stagnation than job redundancies, as the layoffs in Silicon Valley will have a limited impact on employment outside of the tech sector.

Big tech firms have let go 187,000 workers this month, a sizeable amount for the sector, but just 0.1 percent of all US jobs, analysts pointed out, noting that significant layoffs in the non-tech sector are unlikely because the US economy as a whole remains short-staffed.

“The fact that the tech industry is down a little bit does not necessarily mean that the whole labor market is the same,” said Rucha Vankudre, a senior economist at labor market analytics firm Lightcast. “In fact, unemployment is low, and the number of job openings is very high.”

Overextension and Miscalculation

“Major multinational firms really struggled to figure out how to meet labor demand when commerce suddenly shifted to online,” said Rick Chen, head of public relations at Blind, a Silicon Valley-based anonymous community app for the workplace.

It took seven years, from 2012 to 2019, for Facebook's parent company Meta to build up a 40,000 headcount, while its employee ranks more than doubled to a record high of 87,000 in the three years between 2020 and 2022, Chen pointed out.

Wrong expectations are another factor that led to layoffs, Vankudre said. The companies expected spending patterns during the pandemic to continue, but things have returned to normal.

Vankudre also believes that tech firms are suffering because people are more hesitant to invest in them right now, as they do not foresee a solid return under current interest rates.

Back to Wall Street

“Now we’re seeing this kind of pendulum shift back, as a lot of employees at Google, Amazon, IBM, and Salesforce are going back to Wall Street,” said Chen, noting that a lot of professionals from traditional industries, such as finance and management consulting, dived into tech firms when they saw the great boom during the pandemic.

Large Wall Street hedge funds and high-frequency trading firms, including Citadel Securities and Hudson River Trading, are going to be able to pick the best talent, Chen added.

Financial firms were unable to compete with tech companies for talent because the cost of keeping information technology workers on board was too high, but their sound performance during the economic downturn is to their favor now, Vankudre said.

“We might see a bit of redistribution -- top people at these few tech companies spreading out into more industries across the US,” Vankudre added, noting that this could be a good thing.

Editor: Futura Costaglione