As hindsight is 20/20, it is easy to see that the pandemic caused a boom in tech and other industries, and now that the shutdown and immediate aftermath is over, the pendulum is swinging the other way. The slowdown in business is causing turmoil in economies around the world. Weak consumer demand, and especially the downturn in China have already forced many businesses to lay off workers, and even more layoffs are expected. A white-collar recession seems to be looming, according to many experts. Consumers have been changing their spending habits and keeping one eye on the possible looming recession, and this does not bode well for the economy as a whole.
Tech Troubles Continue
The economy and indeed the world have been on a roller coaster ride for the last several years, and the average person is just waiting for the ride to come to an end so they can get back to their normal life. With the Great Resignation that occurred after the pandemic, when workers realized they could find a better job or they could live without the paycheck entirely, many companies rushed to hire more workers. Unfortunately, some of these companies hired too many. When people started pulling back from discretionary spending with a possible recession looming, there were too many workers. The tech world has been trying to right the ship since this realization was made.
According to a report from Reuters, “Tech companies shed more than 150,000 workers in 2022, according to tracking site Layoffs.fyi, and more layoffs are expected as growth in the world’s biggest economies start to slow.”
And it seems like it will be white-collar workers that bear the brunt of the layoffs this year. Forbes Magazine explained the mayhem quite clearly. Meta had the biggest workforce change of any company in 2022, laying off employees in November. The parent of Facebook said it would cut 13% of its workforce, which constituted 11,000 employees. They cite mounting costs and a weak advertising market. Additionally, Amazon axed 3% of their workforce, or 10,000 employees. And not to mention Twitter, with Elon Musk at the helm, who got rid of a full 50% of its workforce.
The entertainment world is not faring any better, according to Reuters, with cable TV network AMC Networks cutting 20% of its U.S. workforce, just as CEO Christina Spade stepped down only 3 months into the role. Video-streaming device maker Roku is cutting 5% of its jobs, approximately 200 workers, citing “current economic conditions.” CNN says that job cuts are underway, and Buzzfeed is set to cut about 12% of its workforce, amounting to over 180 employees in six countries. Even the Walt Disney Company has instituted a hiring freeze and cut some jobs.
The cryptocurrency world is also suffering. Kraken is poised to cut its global workforce by 30%, equaling 1,100 employees, as a result of tight market conditions. Another cryptocurrency exchange, Coinbase Global, will cut over 60 jobs, which is the second round of cuts for the company.
Recession Likely on the Horizon
Although 2022 started well for many tech companies, these same companies hobbled to the end of the year, with layoffs and declining sales. Many of these work from home “laptop class” employees, who were forced to work from home during the pandemic, are now worried for the future, and rightly so.
According to Yahoo, another reason for the growing possibility of recession is that there was such an increase in 30 and 90 day work contracts when people were scrambling to hire. Then when things got tight in the company, these workers were the first to go.
Another interesting anecdote about the recession is that many financial tech companies have been relying on artificial intelligence to build portfolios with their customers, and now the AI is putting them out of business.
With goods and services being more expensive, consumers are being forced to live more paycheck to paycheck. When they do that, they spend less money on frivolous items. This causes a downturn in the economy, which in turn leads to more layoffs. The economic risks of a recession, with high inflation, political instability, and high interest rates, often hit blue-collar workers, but now are headed to the world of white-collar workers.
Forbes Magazine stated, “For example, Adam Aron, the CEO of AMC, announced he wanted the AMC’s board to implement a pay freeze for him in 2023. He also requested top executives in the company follow suit as the company continues to struggle due to issues exacerbated by the pandemic.”
Preparing to Ride the Roller Coaster
Indeed it seems like the economy is a bit of a roller coaster, because some parts of the blue-collar sector are thriving. Yahoo reports, “While there were notable job gains in leisure and hospitality, health care and government work in November, professional and business services accounted for just 6,000 of the 263,000 nonfarm jobs added that month.”
No one knows exactly what will happen, so being ready for anything is your best bet. There are some things that people can do to prepare themselves for a recession. First, an emergency fund is always a good idea for any surprises that life sends your way. Experts recommend 3-6 months of your expenses, but even if you save a few hundred dollars, that will help the cause. Additionally, cutting costs in your home is important and can increase your safety net. Anything from cutting back on name brand items to buying clothing at thrift stores can keep you under budget in this expensive economy.
If you think you might be among those laid off, it is important to update your resume and have it ready to go. This will help you land on your feet if you do lose your job. Another idea is to build your repertoire of skills, through a class online, adding anything creative-based that a computer cannot replicate in AI so you cannot be replaced by a computer.
Finally, if you are trying to keep your family afloat during a recession, you might not have the time you need to study the stock market, but it is important to keep up with your investments during a recession. Forbes Magazine recommends the Inflation Kit, which will keep an eye on the market for you and adjust to any economic swings.
The last few years have certainly been a wild ride, and the world is not out of the woods yet. Prepare yourself for the unknown ahead and, expect a bumpy ride.
I like to spend my time giving back with organizations that focus on mentoring aspiring entrepreneurs. I have supported after school programs that focus on entrepreneurial and global initiatives in local primary schools. I recently extended my mentoring to include students at Case Western Reserve University.