Tech Layoffs Not Leading Factor for Cuts in Other Industries: Morgan Stanley

A mini game character appears in front of the new Meta rebranding logo displayed on Facebook in this illustration taken October 28, 2021.

Dice rovich | Reuters

Technology employees in companies from Asana to me Amazon And the meta They’ve been thinned out by massive cutbacks not seen since the early days of the Covid-19 pandemic, but on a new note, Morgan Stanley analysts say they don’t view these layoffs as a “harbinger of change” for the broader business group.

In a research note sent out on Thursday, Morgan Stanley analysts cited “single” tech hiring relative to the rest of the labor market and the outsized market capitalization of tech companies as factors in why tech layoffs have a significant impact on perceptions.

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But as the analysts note, tech layoffs since December 2021 “just total 187,000.” […] A large number for the sector [but] Barely more than 0.1% of all jobs in the United States. [their] pre-pandemic level[s],” the broader market leader, which until recently lagged behind the 2019 employment peak.

Morgan Stanley still expects a “sharp” drop in employment growth, citing sluggish consumer demand precipitated by higher Fed rates as a catalyst for hiring cuts “in most sectors of the economy.”

But for these analysts, the prospect of significant job cuts in non-tech industries remains unlikely. Morgan Stanley analysts pointed out the simple fact: [U.S.] The economy in general is still understaffed.

In other words, even if the executives wanted to trim the fat, “it looks like there’s less fat to trim.”

But the analysts wrote that the perception of cost efficiency and careful hiring practices may be what the market wants to hear. For senior executives at Internet companies and in broader markets, “it is important for companies to assess how to best manage cash flow” as they adjust to a “slower” 23 world, the analysts write.

For now, though, tech layoffs aren’t yet “the canary in the coal mine.”

— CNBC’s Michael Blum contributed to this report.

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