The economic news was sunnier at the start of 2024. But the news from corporate America doesn't quite agree. In recent days, Microsoft, eBay and Salesforce have joined the list of companies that have announced layoffs this month.
Fluctuation in the labor market is to be expected, even necessary. And Daniel Keum, a management professor at Columbia University, says an important part of that exodus has stalled.
“People just don’t quit their jobs. “In order to return to this natural fluctuation rate, companies are resorting to layoffs more often than in the past,” says Keum.
The churn rate has fallen over the past year. The last survey of job vacancies and labor turnover showed it was just over 2%. While workers remain at work, companies are trying to innovate.
“So they're experimenting very actively, and those experiments require hiring and firing,” Keum said.
Experiments typically begin at the beginning of the year, says Layla O'Kane, an economist at Lightcast, a labor market analysis company.
“Because people are reviewing their budgets, trying to plan something for the coming year and trying to understand what their key goals and perspectives for the company will be this year,” O'Kane said.
New year, new priorities. Especially in the technology sector, where there have been a particularly high number of layoffs recently. Angelo Zino, equity analyst at CFRA Research, says the industry is focused on expensive generative AI development.
“One way for some of these tech companies to really pay for some of these genetic AI investments is to reduce headcount,” Zino said.
Not long ago, tech companies could throw spaghetti at the wall and see what stuck. Now growth has slowed. Therefore, companies have to be selective about their projects.
“To maintain desired levels of investment, in many cases better rationalization is required,” Zino said.
He says that while recent layoffs aren't a permanent part of the overall economy right now, they could become more permanent in the tech sector.
A lot is happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down what's happening in the world and tell you how it impacts you in a fact-based, understandable way. In order to continue to make this possible, we rely on your financial support.
Your donation today supports the independent journalism you rely on. For as little as $5 a month, you can help sustain Marketplace so we can continue reporting on the things that matter to you.
Comments are closed.