October 23, 2020

Tech hiring slowdown bad sign ahead of jobs report


Hiring in tech remains muted, sending another distressing signal ahead of Friday’s highly anticipated jobs report. 

As of late July, tech job postings were down 36% compared to the same time last year, according to recent data from the online platform Indeed.

The sector has lagged the broader U.S. economy, too. Listings on Indeed’s site nationwide currently sit 21% below last year’s levels. Tech postings started to fall behind in mid-May and, since then, the gap has grown steadily.

New insights from the website Glassdoor paint a similar picture. 

While tech job openings did increase between late June and late July, Glassdoor senior economist Daniel Zhao stressed that the industry continues to lag the rest of the economy. Moreover, tech’s recovery has progressed in “fits and starts”, a humbling reminder of COVID-19’s bruising impact as parts of the country grapple with resurgent outbreaks. Over the past week, tech openings increased just 0.6%, pointing to persistent anemic job growth.

“Initially, tech was holding up better than other sectors due to the quick adaptation to remote work,” AnnElizabeth Konkel, an economist at the Indeed Hiring Lab, told CNBC. “But, nationally, as the long-term effects of the pandemic have started to sink in, tech has flatlined. That’s the key change — the economic expectations around the virus went from ‘we’ll be done with this in a month or two’ to…’we’ll be in this for the long haul.'”

These tech-specific trends dovetail with recent bleak macroeconomic data. On Wednesday, ADP reported private payrolls increased by just 167,000 in July — well below the 1 million analysts expected and a sign that the move to get displaced workers back to their jobs has slowed. On Thursday, new data showed 1.2 million people filed for unemployment benefits last week. While that was a decline versus the prior week, it marks the 20th straight week in which new claims topped 1 million. More importantly, it reveals that 31 million Americans are still collecting unemployment benefits — a sign, some economists say, that many layoffs are translating into permanent employment loss.

With the all-important July jobs report due out Friday, several analysts told CNBC tech’s hobbling recovery underscores the depth of the economic hole out which the U.S. must club.

“What’s going on in tech is a reflection of what’s going on in the rest of the economy,” Zhao said.

As tech accounts for roughly 10% of U.S. economic output, the breadth of the hiring pullback tells a sobering story. The industry directly and indirectly supported more than 12 million American jobs in 2019.

In addition, tech companies have started to make cuts over the past month. In mid-July, Microsoft-owned LinkedIn said it will lay off about 960 people, or 6% of its workforce, as the pandemic weighs on demand for its recruitment products. And, just this week, Booking Holdings — the parent company of Booking.com, Kayak, and Priceline — announced plans to shed 25% of its global workforce. Booking.com has more than 17,000 employees worldwide.

Emerging tech hubs faring worse

The one-two punch of layoffs and a hiring slowdown has hit the most prominent tech hubs, like the Bay Area and Seattle. But the drop-off is even more pronounced outside of these areas. In eight tech hubs identified by Indeed, data science job postings, for example, are trending 37% below last year’s level, as of late July. In all other metro areas, data science jobs are off by 51%.

Konkel said that could signal tech companies are pushing for centralization, as opposed to dispersing their workforce. 

“Before the coronavirus, some of these smaller tech centers were starting to make headway,” Konkel said. “The pandemic has eliminated those gains.”-

This comes even as many Bay Area-based companies have announced plans to shift to remote work through next year. Facebook and Uber joined Google this week in allowing their employees to work from home until at least July 2021.

Pockets of hiring

The hiring slowdown in tech has extended to all corners of the industry and myriad job roles.

According to Glassdoor, postings in the “information technology” category are down 43% from last year, “consumer electronics” roles are down 42% and listings in “computer software and hardware” are down 36%.

As far as job roles go, data scientist and IT management hiring is particularly tight, with postings 43% and 45% below last year’s levels, respectively, according to Indeed. Listings for jobs in artificial intelligence and machine learning are down 29% year-over-year.

“These roles are seen as more of an investment, and companies are being a lot more conservative than they would have been pre-coronavirus,” Konkel said. “That’s the difference between those categories and IT help desk jobs, for example. Making sure employees have the hardware they need — that’s what firms are seeing as hyper-critical.”

Despite the overall slowdown, some pockets of tech have continued to hire.

According to Glassdoor, postings in the “internet and tech” category — which include many roles at social media and e-commerce companies — are higher than they were at the same time last year. Between late June and late July, internet and tech roles on the platform rose 57% to 124,200. Those listings are 102% higher than the year ago period.

Businesses that are close to e-commerce, like food delivery and online retail, have also held up better than other tech sectors. While Zhao admits that these companies saw a large surge in hiring at the beginning of the crisis as spending dramatically shifted online, he emphasizes that that trend has extended during the first half of the summer.

“E-commerce and delivery have been some of the largest drivers in job openings in tech just over the last few weeks,” Zhao said.

Companies that help businesses handle remote workforces are also hiring at a steady clip. A spokesperson for Slack, which makes chat and collaboration software, recently told CNBC the company had aggressive hiring targets heading into 2020, and those haven’t changed. At the outset of the pandemic, the company prioritized front line customer support to accommodate an influx of customers, and has been looking to fill engineering and data scientist roles.

Rising demand from job seekers

Meanwhile, demand for tech jobs is rising, which could mean that tech workers don’t have as much leverage as they used to.

In February, tech job postings received 68% of the total clicks of an average posting on Indeed. By late July, tech listings were attracting 95% of clicks. Facebook and Twitter, for instance, have grabbed prospective employers’ attention with their permanent remote options, according to Indeed’s search data.

Konkel suggested this heightened competition for spots could spell a loss of bargaining power for tech workers and push companies to scale back certain benefits.

“Even during an economic crisis, there are some roles where the shortage of qualified and experienced workers is being felt to some degree,” Zhao added. “And this crisis is unusual in that it’s not just a decline in the demand for workers, but also a decline in the supply — because you have a lot of qualified workers who are standing on the sidelines, either because they don’t feel like now’s a good time to switch jobs or they’re staying home to take care of their children or family.”

Zhao stressed that the last two months are a key reminder that any employment rebounds in tech — and the “extremely fragile” broader economy — hinges on controlling the public health crisis.

“Any progress can be easily and quickly reversed,” Zhao said. ” If reopening prematurely leads to growing outbreaks, economic gains will be fleeting at best, leaving the economy stuck in the doldrums. At worst, rising cases risk imperiling the already frail economy and sending us back into a double-dip recession.”



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