The unemployment rate in the US tech job market is about half that of other industries – just 1.5% – so the deluge of recent reports of major “tech-worker” layoffs can be confusing.
For example, current data from online tracker company Dismissal.fyi shows that in 2023 alone, 465 technology companies laid off a total of 126,057 employees. And according to the discharge tracker TrueUp, so far this year, 608 tech companies have announced layoffs, affecting 162,541 people (or 2,426 people per day). In 2022, there were 1,535 layoffs at technology companies and 241,176 layoffs.
While technology companies have laid off hundreds of thousands of workers in the past six months, the majority of those workers did not hold IT positions. And even when companies reduced their workforce through layoffs, layoffs typically amounted to no more than 5% to 6% of the total workforce, according to Gartner Research.
“Contrary to what we see in the headlines, many of those affected by layoffs are in corporate roles, rather than technical roles,” Gartner analyst Mbula Schoen wrote in a question-and-answer post this week. “In addition, there are increasing opportunities for IT jobs outside of traditional technology companies, so it’s important to look beyond the technology provider community to really understand the state of the tech talent crisis.”
In fact, Gartner found that the companies behind the 10 largest tech talent layoffs now employ more than 150,000 more people than they did in early 2020. When it comes to tech jobs, hiring continues to outpace layoffs.
Overall, there were about 264,500 new jobs in the IT job market in 2022, according to industry consultancy Janco Associates. Those new jobs came on top of the 213,000 IT jobs created in 2021.
ComTIA, a non-profit organization for the IT industry and workforce, uses online job data from employers to predict future technology hires. By 2023, US companies will hire 268,898 tech workers, the group predicts.
Lisa Rowan, a research vice president for IDC’s HR, Talent, and Learning Strategies Group, said that while a number of technology jobs are disappearing in the layoffs, anyone fired with IT acumen is “quickly” rounded up.
Gartner expects current demand for tech talent to significantly outstrip supply through at least 2026, based on the research firm’s latest results IT spending forecast.
Industry analysts view the current spate of layoffs more as a course correction than an indication that the economy is slipping or that larger layoffs are on the way. Many of the forced cuts are largely the result of publicly traded companies looking to bolster share prices and meet shareholder desire to cut spending, Schoen said.
For example, Amazon’s workforce doubled between 2020 and 2022, but revenue grew only 30% over the same period.
“Facing economic headwinds and excessive labor costs due to rapid expansion over the past few years, many technology companies are now seeing the need to contain operational costs,” said Fiona Mark, principal analyst at Forrester Research, in a statement. blog post.
And while the layoffs have been described as an adjustment after overly optimistic hiring, data shows new hires weren’t necessarily affected, Gartner’s Schoen said. “Instead, recent layoffs have affected a broader range of employees and initiatives as organizations prioritize key products and services to position their company for specific market opportunities,” she said.
A post-COVID ripple effect
During the COVID-19 pandemic, organizations scrambled to move to online sales and services; digitization projects exploded and led to panic hiring in many organizations. All the while, the retired baby boomers were making industries scramble to fill positions.
Many of the jobs associated with the hiring wave were in human resources, recruiting, marketing and sales. And inevitably, as the overall available pool of workers dwindled, contractors were tapped for specific work. According to Gartner, it is precisely those employees who are most affected by layoffs.
Contractors are usually the first to leave, according to Lily Mok, Gartner vice president of research. “Then they (companies) go to the employee pool for less critical areas or those employees with a lower risk of inability to rehire.”
Tech companies don’t all approach layoffs in the same way, according to Forrester’s Mark. Some organizations, like Amazon, are focusing on products that aren’t generating the revenue they expected, such as the Alexa device line. Others make cuts across multiple departments.
“However, when we look at the data recorded on Layoffs.fyi, the reduction in technical roles comes out behind roles in teams such as human resources, marketing and operations,” said Mark. “Tech companies still value engineering and technical talent as a way to create differentiation and growth. However, tech leaders should be aware that layoffs in other departments, such as recruiting, will have an impact on their ability to staff teams.”
IT functions have rarely been on the chopping block. Affected by digitization technology needs and a lack of available tech talent due to the Great Resignation, the demand for tech workers is now more than ever and companies continue to buy technology.
In 2023, business spending on software and IT services is expected to grow by 9.3% and 5.5% respectively. According to Gartner, $4.5 trillion will be pumped into technology worldwide, up 2.4% from 2022.
According to a recent LinkedIn report, IT jobs topped the top 10 hard skills organizations demand most, and technical jobs also accounted for most of the top 10 slots.
Employees with software development skills, which companies need to build the products that consumers and businesses depend on, are in the highest demand, according to LinkedIn. Data management skills are also prominent. Skills like SQL (No. 2 on LinkedIn’s list) help companies manage and understand data across the business, and are still in high demand.
“I don’t see job cuts in security, cybersecurity or analytics roles — they’re pretty much short on talent,” Mok said. “It’s very competitive for IT jobs.”
The demand for IT skills is greater than the demand
For example, in North America, the supply-demand ratio for cybersecurity talent and data scientists is 0.4, according to Gartner. In other words, there is less than one candidate available for every cybersecurity and data scientist job opening.
CIOs, hiring managers and recruiters are under unprecedented pressure to source tech talent. In a Gartner survey conducted in November and December 2022, 86% of CIOs reported increased competition for qualified candidates, and 73% were concerned about IT talent turnover.
According to Janco Associates, recruiting and retaining employees are now a primary priority of C-Level management.
Gartner’s Schoen agreed, saying CIOs need to be more mindful about adopting proven practices that help them effectively attract top talent and fill open positions quickly. “CIOs, for example, should cast their nets wide to tap into a large pool of passive IT candidates,” she said. “Many IT hiring plans are designed to target active job seekers rather than passive job seekers, leaving an untapped opportunity to increase the quality and quantity of IT candidates.
“CIOs should consider ramping up employee referral programs or using talent intelligence capabilities that leverage artificial intelligence to pull passive candidates out of social search,” said Schoen.
CIOs can also target laid-off workers in adjacent tech categories and train them to build the necessary IT skills. For example, Schoen said it’s hard to find data scientists, but there are a significant number of data and business analysts available who can be trained in more technical skills.
“CIOs should work with hiring functions to adjust job posting requirements to include adjacent skills desirable for open positions,” Schoen said.
IT talent retention is also impacted by the rise in layoffs, even if those being laid off are not in IT. According to Mok, corporate downsizing is driving IT workers to leave companies they see as less stable. “Downsizing always has a negative connotation, no matter how big or small.”
Tech salaries are still rising
The shortage of technical talent also increases IT salaries, according to Janco Associates. On average, IT salaries increased by 5.61% in 2022 and are expected to increase by as much as 8% on average this year, according to a recent report from Janco. The median compensation for all IT professionals in 2023 is $101,323; For IT professionals in large enterprises it costs more than $102,000; and for executives, it averages $180,000.
According to Schoen, organizations that renew their employee value propositions will be better positioned for targeted and efficient growth.
“Companies that fail to meet their employees’ expectations may find that even if they succeed in recruiting candidates, those candidates leave once a better offer comes along,” said Schoen. “Focusing on factors other than compensation that employees care about, such as flexibility and growth opportunities, can improve the IT organization’s EVP to win current and future competition for talent .”
According to Mok and others, companies that are considering layoffs should also be warned.
“You have to think about the availability of talent when you need to rehire people. Even if you have to cut them, it will take even longer to rent them back. So it’s a very high risk to give up highly requested features,” Mok said. “The main criterion for downsizing should be, ‘Can we live without these roles and still execute on our future strategy in the next 12 to 18 months?'”
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