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Shopify ( SHOP ) joined the ranks of tech companies laying off workers today by announcing plans to cut 10% of its workforce. The recent tech crackdown and hiring freeze is a boomerang effect, LinkedIn Chief Economist Guy Berger told Yahoo Finance Live (video above).
“Technology continued to hire, at least up until the end of last year, it kept going up and up and up, and now it’s going down really fast,” he said. “I would say it’s kind of like a boomerang that’s going up very quickly and coming down very quickly. The reason for this is that the sector has at some point propelled itself into the tail end of the bull run, and now it’s at the center to pull back quickly.”
While we haven’t seen this kind of pullback in the rest of the economy, it’s what Berger expects, especially as fears of a recession grow.
“If we’re all worried about the recession, one thing we’ll be watching closely is whether other sectors are starting to follow technology’s lead,” he told Yahoo Finance.
It is important where the layoff occurs
It’s been known to lay off smaller tech companies that have grown particularly fast during the pandemic, such as digital mortgage startup Better, delivery app GoPuff, online real estate brokerage Redfin and fitness tech startup Tonal. However, the most important takeaway from this is that those layoffs will eventually spread to technology and other sectors, Berger said.
” feel like [layoff] The pain is concentrated,” he said. “I think it’s worth watching very closely, is it spreading? Are big companies starting to fire people in tech? Are they non-tech companies or just a few stories here and there? At what point do legends begin to change into something else?
We’ve seen some cutbacks at big tech companies, with most of the biggest companies so far, including Apple ( AAPL ), Alphabet ( GOOGL , GOOG ) and Meta ( META ), resulting in hiring cuts and shutdowns.
Ultimately, despite the slowdown in tech hiring, workers still have a lot of agency in this labor market. The US unemployment rate is currently at 3.6%, well below the 13% recorded in the second quarter of 2020 since the start of the pandemic.
“Anything that happens in the labor market going forward is still very tight,” Berger told Yahoo Finance. “There are indicators that the unemployment rate is back to where it was before the pandemic — and if you look at other indicators like job openings, hiring, layoffs, it’s tighter.
Ali Garfinkle is a senior technology reporter at Yahoo Finance. Find her on Twitter @agarfinks.
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