Tech’s view on the global economy can be summed up in an email Elon Musk sent Thursday: “super bad feeling.”
This week, Musk announced Tesla (TSLA) will be laying off 10% of its staff.
Amid this downbeat outlook for economic growth, prospects for workers dimmed in some pockets of the business world. Musk’s comments follow JPMorgan (JPM) CEO Jamie Dimon’s pronouncement earlier this week that a “hurricane” is bearing down on the U.S. economy.
But in the view of one economist, this growing drumbeat of negative news from the tech sector offers a “misleading” picture of the U.S. labor market right now.
“While the economy will undoubtedly slow in the coming months, anecdotal evidence of hiring freezes and layoffs at tech companies is misleading with overall job openings still near record-highs and layoffs at record-lows,” Greg Daco, chief economist at EY-Parthenon, said Friday. “Even high frequency data from claims for unemployment benefits do not point to a severe labor market slowdown.”
Friday morning, hours after Musk’s warning made the rounds, the Labor Department reported nonfarm payrolls grew by 390,000 in the U.S. last month, more than had been expected by Wall Street. The unemployment rate in May held steady at 3.6%.
Musk’s callout is far from the only sign that labor conditions for workers in the tech space have grown more challenging of late.
It also serves as the latest indication that this recovery is taking a far different shape than the rebound that followed the financial crisis.
In a blog post Thursday afternoon, Coinbase (COIN) announced not only will it be freezing new hires and backfills for the time being, it will now rescind job offers already accepted by some candidates.
“Two weeks ago, we paused hiring while we took time to reprioritize our hiring needs against our highest-priority business goals,” said Coinbase’s chief people officer L.J. Brock. “As these discussions have evolved, it’s become evident that we need to take more stringent measures to slow our headcount growth.”
Tech giants ranging from Meta Platforms (FB) to Nvidia (NVDA) to Peloton (PTON) and Netflix (NFLX) have all announced some version of either a slowdown in hiring, a hiring freeze, or an outright headcount reduction.
As The Daily Shot flagged on Twitter this week, the number of news stories mentioning “hiring freeze” has exploded this month to the highest levels since the summer of 2020, when the economy was just emerging from a pandemic-induced recession.
To be sure, a slowdown in hiring across the U.S. economy is the explicit goal of both the Biden administration and the Federal Reserve as policymakers work to bring down inflation down from 40-year highs. But monthly job gains are now roughly double the pace seen in the year before the pandemic.
While overall hiring was robust in May, employment in the retail sector declined. Combine retail’s slowdown with signs from the tech world and we see clearly that pockets of the economy are leveling out after frenetic growth phases as the economy rebounded from the pandemic.
For now, however, a few high-flying, high-profile tech companies moderating their employment plans suggest workers are merely facing industry-level stressors much more than they suggest broader economic challenges ahead.
Whether this dynamic holds will be one of the most-discussed stories for investors this summer.