Sweeping layoffs in tech have some people worried about another dot-com bubble. : The Indicator from Planet Money This jobs Friday, we look to the tech sector, where companies are laying off thousands of workers in a rapid reversal of their pandemic-era hiring boom. What effects could tech layoffs have on the broader economy?

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Should we worry about another dot-com bust?

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It is Jobs Friday...


My favorite time of the month.

MA: ...That day of the month when the latest jobs report from the Bureau of Labor Statistics comes out. And according to the report, U.S. employers added 263,000 jobs in November, more than expected. Also, the unemployment rate stayed flat at 3.7% - so labor market seems pretty strong.

WOODS: And yet there is one group of workers where - I don't know if you've checked the news out - you'd think they have it pretty bad. We're talking about tech workers.


UNIDENTIFIED REPORTER #1: Well, layoffs in the tech industry have been piling up this year.

UNIDENTIFIED REPORTER #2: Big Tech announcing a slew of layoffs - Amazon, Twitter...






UNIDENTIFIED REPORTER #7: Salesforce laid off hundreds of employees this week.

MA: And this isn't just happening in Big Tech. It's also happening in what you might call little tech, right? Like, dozens of smaller startups are also shedding jobs. And as I'm seeing all these headlines in recent weeks, I cannot help but think of something that happened two decades ago, and I'm talking about the dot-com bust.

WOODS: The dot-com bust followed the dot-com bubble, which was this gold rush period in the late '90s when the internet was taking off, and it seemed like anybody with money to invest was just throwing at any company with a website with a .com at the end of its name. And in the year 2000, that bubble dramatically burst.

MA: Tech stocks crashed. Hundreds of companies went under. People lost their jobs, and a two-year recession followed. So when I heard about these recent tech layoffs, I started to get this, like, ominous feeling. Like, obviously it sucks for people who are out of the job right now. But also, we got to wonder, could this be something that triggers a recession like kind of what happened after the dot-com bust?


WOODS: And I'm Darian Woods. Today on the show, two economists with their fingers on the pulse of the labor market answer that question. They tell us whether the waves of the recent tech layoffs might ripple into the broader economy.


MA: OK. Before we get to how tech layoffs relate to the broader economy, a quick recap on why we're seeing so many tech companies lay workers off right now.

WOODS: So we've all heard the story about how the pandemic changed consumption patterns a lot, like a lot more laptop and Netflix at home, working from home, etc., etc. But at the same time, the Fed was making interest rates for borrowing very, very low. And so that meant that tech investors could afford to make these big bets that might pay off way into the future. The money taps were flowing.

JULIA POLLAK: And so tech companies expanded really rapidly to take advantage of that opportunity, and investors were 100% behind that strategy. Investors said grow at all costs. And if you're not - if some of these bets don't fail, you're not being aggressive enough, right? Go for broke.

MA: That's Julia Pollak, chief economist at the job site ZipRecruiter and a friend of the show. So Julia gives Facebook's parent company Meta as a prime example of this grow-at-all-costs strategy. During the pandemic, its staff grew by roughly 50%, adding about 30,000 employees. And of course, it wasn't just Meta doing this. Tech companies involved in retail and entertainment and real estate were also hiring like mad, and they needed everything from software and product developers to marketing and HR people.

WOODS: But then the world changed. By spring of this year, the pandemic had eased in the U.S. A lot of people didn't want to be tethered to their TVs and their phones and Peloton so much. Plus, because of all the inflation, the Fed had started raising interest rates, and there were recession fears. So ad revenue shrank, and venture capital was running dry. And as these headwinds started building, tech companies quietly started to pump the brakes on their hiring spree. Nick Bunker - he's another friend of the show - is with Indeed Hiring Lab and does economic research for the job website Indeed.

NICK BUNKER: We saw the real pullback earlier this year. We could see job postings start to come down.

MA: Companies who seemed to be changing their mind - they're like, on the second thought.

BUNKER: When I saw that data, I was like, OK, the probability of layoffs happening for those kinds of jobs went up.

WOODS: And around summer, the dam seemed to break. Now, there aren't official tallies of how many tech workers have been laid off, but there is this crowdsourced database. And it was started by a tech worker. It's called Layoffs.fyi. And it gives us some idea. So from May to October, somewhere between 5- to 17,000 people a month reportedly lost their jobs. And this past month, more than 50,000 did.

MA: So we had a period of exuberance where investors are just chucking money at tech companies, followed by a big fall in tech stocks and a lot of layoffs. Where have we seen this before?

WOODS: The 2000s are back.

MA: Right. And this is where it really started to feel like - could this be another dot-com bubble in the bursting? This is where Nick essentially told me to, like, take a deep breath. We aren't there yet, and things are different now.

BUNKER: What we're seeing now sort of rhymes with the year 2000 in some sense, but I don't think it's at quite the scale.

MA: For a sense of that scale - in the past year, the stocks on the tech-heavy Nasdaq exchange lost about 25% of their value, which is a lot. We shouldn't downplay that. But during the dot-com bust, the Nasdaq fell by almost 80%.

WOODS: Another thing that Nick said to keep in mind is that the tech workforce is pretty small compared to the overall workforce in America. So according to the BLS, the Bureau of Labor Statistics, the overall workforce is around 165 million people.

BUNKER: If you go to the BLS website, which I'm certain everyone who listens to this podcast does on a regular basis...

MA: Yeah, right after you have, like, morning coffee, it's BLS website.

BUNKER: You joke, but that is my life.

MA: I love it.

BUNKER: I know I'm an outlier there.

WOODS: I go to the BLS website but maybe not straight after coffee.

MA: (Laughter).

BUNKER: If you try to line up, you know, the companies that we're talking about - the companies that have gotten a lot of headlines recently with the layoffs - with their sort of share of overall employment, it's somewhere around 2% of all employment.

MA: Another reason we should not worry about tech dragging down the rest of the economy right now is that the job market is still pretty strong. The vast majority of employers are looking to hire, not fire right now. And Julia Pollak at ZipRecruiter, she says when you look at the data on all the sectors, not just tech, the economy's adding 60% more jobs each month than it was before the pandemic.

POLLAK: The layoffs that are happening in tech are sort of tiny compared to the absence of layoffs everywhere else in the economy. You know, so broadly, I think if you zoom out from tech, weakness in Silicon Valley and on Wall Street is still largely being offset by strength on Main Street. And so the damage we're seeing is quite contained within tech and is not having an effect on the broader economy. And there's very little risk of these tech layoffs causing us to go into a recession.

WOODS: And Julia says there may even be a silver lining here. So you've got tens of thousands of software developers, recruiters and accountants hitting the job market, and that could actually be a good thing for the broader economy. Almost every industry nowadays wants to up its technological game. Government departments and schools and hospitals all want to improve their websites and their data collection. You know, they want to use technology better.

POLLAK: There is enormous demand for tech talent. If tech companies had continued to grow at the rate that they were growing at, they would have completely monopolized tech talent in the United States. Already, for years, government agencies, health insurance companies have been missing their tech recruiting deadlines by 25- to 50% 'cause they just couldn't compete with Big Tech. Now, those industries may stand a chance.

MA: And, you know, some laid-off tech workers may decide they don't want to join another company. They might think, I want to start my own company. And Julia thinks that might be good for the economy, too. And just in case you're wondering, there have been tens of thousands of tech layoffs, but Julia says a lot of Big Tech companies are still much bigger than they were before the pandemic because of the hiring sprees they went on.

WOODS: OK. So there you go. Do we have a dot-com bust?

MA: Not right now, at least not yet.


WOODS: The show was produced by Audrey Dilling and was engineered by Debbie Daughtry. Sierra Juarez and Dylan Sloan checked the facts. Viet Le is our senior producer, and Kate Concannon edits the show. THE INDICATOR is a production of NPR.

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