San Francisco

Compass and camera Getty Images

US employers added more jobs than expected in April amid a tight labor market, the Bureau of Labor Statistics said on Friday.

But the technology sector, which is booming during the pandemic, is showing signs of shrinking.

Facebook’s parent company, Meta, is pausing hiring and reducing some recruitment plans. An insider reported last week based on an internal note he reviewed. “We regularly re-evaluate our talent pool in line with our business needs, and in light of the spending guidelines given for this revenue period, we are slowing its growth accordingly,” a spokesman told CNBC.

Amazon’s chief financial officer told analysts when announcing the company’s profits that its warehouses had become “redundant staff“After a lot of hiring during widespread blockades, which made consumers shop more and more online.

These are not just the biggest technology companies.

Uber’s chief executive told employees in a statement from CNBC that the company “will treat hiring as a privilege and be aware of when and where we add staff,” adding: “We will be even tougher on costs such as whole. “

Retail brokerage Robinhood recently said it was cutting about 9 percent of its full-time staff to eliminate overlapping jobs after high hiring. Peloton announced earlier this year that it would reduce its corporate workforce by about 20% as part of a cost-cutting measure. And startups like the Cameo celebrity video calling app recently announced a round of layoffs, amounting to about a quarter of their staff. The information was first announced.

The cuts are in stark contrast to the rest of the economy, where jobseekers still have significant bargaining power and employers struggle with rising labor costs amid inflation and a wave of resignations. In April, the growth of leisure and hospitality jobs was leading by 78,000, signaling that demand is returning for pre-pandemic activities.

According to experts, the factors that weigh on the technology industry are unique to a sector that is growing rapidly during the pandemic and do not necessarily mean a wider slowdown. While some of the pressure may come from macroeconomic trends that may later emerge in other industries, many economists expect the tight labor market to be here for a while due to the aging US population and other factors.

Inflation and other macro factors

Trends in the technology sector can be difficult to track in labor data due to the many different business models in the industry, from storage on Amazon to advertising on Facebook. But looking at the information sector reported by the Bureau of Labor Statistics, Veneta Dimitrova, a senior US economist at Ned Davis Research, said: “There doesn’t seem to be a leading trend in this industry for overall employment growth.”

However, inflation can be a factor in hiring technology, just as it affects other sectors of the economy.

Terry Kramer, an associate professor at the UCLA School of Management, said a company like Amazon is a leader.

Inflation is 8%, economic growth is now starting to slow, people just don’t buy that much, “Kramer said.” So, for me, Amazon’s story is more where in e-commerce, their main platform, people are just more -cautious what they buy. Because on an inflation-adjusted basis, there are fewer dollars that consumers can spend. “

For a company like Amazon, inflation means that the company’s costs will rise. “If the consumption of their products and services doesn’t grow so well, so high, it could eat up their margins,” said Agron Nikai, an associate economist at The Conference Board. “So they are forced to slow down their growth.”

But delays in other companies may be more specific to their business. For example, Kramer attributed the freeze on Meta’s hiring in part to changes in Apple’s iPhone privacy, which damaged Meta’s ability to target ads.

Post-pandemic return

The technology sector was one of the biggest beneficiaries of behavior change in the midst of the pandemic. As offices close and people spend more time at home, investors flock to so-called home stocks, such as Peloton, Zoom and Netflix.

As people return to the office, travel and eat out, many of these companies have had to adjust.

“When the pandemic hit, it was basically a shock to preferences,” said Daniil Manaenkov, an economic forecaster at the University of Michigan. As those preferences changed, he added, the government intervened to help businesses where demand suddenly hit the wall.

Now the cycle is reversing, but without the help of the government.

“Now that we are going through the opposite shock, there is no help from the government, but it is still a shock of preferences,” Manaenkov said. “So there is the potential to be a little painful for the sector that benefits from the pandemic. But also for the people who were employed there because they will not receive generous unemployment. “

If cuts in the technology sector become more frequent, it could have an effect on the wider economy, Manaenkov said. Without government incentives, redundant technicians can reduce their discretionary costs, which could contribute to wider market delays.

But some larger technology companies have actually expanded their hiring to different parts of the country, which could mean they are still feeling the effects of the tight talent market, Nicae said.

Turning to the wider economy, job security for workers seems quite stable so far.

“This is probably the safest time to keep your job right now because the job market is so tense,” Nikai said.

Rebalancing the VC portfolio

The delay in hiring among start-ups backed by risks may be the result of the so-calleddenominator effect“According to Mark Peter Davis, managing partner of the New York-based investment firm and incubator Interplay.

It starts with large institutional investors who own a combination of assets, including public stocks and venture capital. If the value of publicly traded shares falls significantly, these investors will suddenly find themselves with a relatively higher percentage of their venture capital portfolio and will have to rebalance by limiting new investment in VC.

As a result, institutional investors may begin to withdraw from venture capital funding to rebalance their portfolios. This can spread across the start-up financing landscape, forcing companies to reduce their cash burns – in some cases this means layoffs.

Martin Pichinson is co-chair of Sherwood Partners, a Silicon Valley firm that helps restructure or close startups. He said his business has remained fairly consistent after a short slower period spanning parts of 2020 and 2021. He attributed this slower time to the proliferation of loans from the government’s wage protection program, which essentially gave some small businesses additional track. But since then, he has seen the business grow again.

He said the consistency of his business is largely due to the venture capital model, which depends on making big bets, expecting many to fail in the end. This is especially true now IPOs are at a standstillwhich makes it difficult for start-ups to exit and gives investors a return on their money.

From overgrowth to effective growth

Kramer noted that the slowdown in technology hiring does not mean that the industry has stopped growing.

“People need to look at how much they’ve grown in the last two, three, four years because of Covid,” Kramer said. “If they grow by 30, 40% and then go down to zero to 5% growth, they continue to grow and have already hired so many people.”

Two hiring platform executives said they still see a commitment to hiring technology companies, but the general approach has changed.

Jerome Ternink, CEO of the talent platform SmartRecruiters, called the move “growth at all costs to effective growth.”

“Investors have made it clear that now is the time for technology to continue to grow, but that money is no longer free,” Ternink said. declining public market assessments among the technology industry. “This means a slower pace for additional hires for technology companies.”

Hired, a technology and sales-focused job platform, has yet to see a slowdown and has actually seen more hiring investment than Big Tech, according to CEO Josh Brenner, although it anticipates some instability around small technology companies.

“From what we have seen, companies are focusing on long-term employment after learning from the retirement that occurred in 2020,” he said in a statement. “It’s not worth shutting down the rental pipeline. Given how much companies had to compensate for last year, we are not surprised to see some delay on an annual basis.

Davis, a venture capitalist, still sees great potential in start-up investing, as hard times “starve weak companies” without killing the strong.

“I told the LP we’re talking about that it’s actually a hunting season,” Davis said. “It’s a great time to put money into work. And a lot of great companies have been created since the last recession.”

Subscribe to CNBC on YouTube.

WATCH: This is the worst environment since the dotcom crash, says Sacks of Craft Ventures

Previous articleExoplanet missions must revolutionize science
Next articleMicrosoft fixes three zero days and eight critical flaws in Tuesday’s May fix update