CTO at HackerEarth. Vishy enjoys design thinking, photography, music and the intersectionality of art and science.
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Almost every day this past summer, the national media analyzed declining economic conditions, covering major tech layoffs and making predictions about what the latter half of the year will look like as Covid, hopefully, fades into the rearview mirror. In contrast, according to the July 2022 jobs report, the US added 528,000 jobs, dropping the unemployment rate to 3.5%, a 50-year low.
While unemployment rates provide a positive market indication, an impending recession has many business leaders, boards and investors preparing for the worst. How healthy is the market really? How should executives be thinking about hiring (and layoffs)?
To find out what’s really going on, this article will examine the changes hiring managers have endured over the last several years, where we are today and the best practices for HR leaders to ride the wave of economic uncertainty without panicking.
The Last Three Years
When the Covid-19 pandemic hit in 2020, global hiring was put on pause. The quarantine and sweeping transition to working from home, however, left time for employees to reevaluate the balance between their work and personal lives. This time for reflection led many to demand more flexibility, higher pay and better benefits. The market—desperate to fill jobs that Covid-19 left vacant—compiled.
Enter the Great Resignation, where droves of workers left long-held positions in search of more balanced, lucrative or fulfilling careers. For several months, candidates held all of the cards. But as the global cost of oil surged, VC dollars came off the table and murmurs of layoffs began to circulate, the balance between candidates and companies began to return. But even as many signs point to a possible recession, one thing is clear—this isn’t 2008, and companies should not react as such.
What About All The Tech Layoffs?
Today, hiring slowdowns have become commonplace across Silicon Valley, but despite announcements of layoffs and program shutdowns, the big firms are, at best, taking a breather. Conversely, fast-growing unicorns or smaller startups that raised big bucks in 2021 are flush with funds. Proceeding with caution, they are following the lead of notable VC firms that are warning founders of the global market conditions.
In addition, the Federal Reserve is tightening the screws to try and combat inflation, so a cautionary stance is reasonable. But as Warren Buffet put it, “Mr. Market—he’s kind of a drunken psycho.” We have seen extreme reactions to the ups and downs of the last couple of months, and overcorrections can be problematic.
In reality, most of the tech hiring slowdown appears more like a reaction rather than a response to the actual economic environment, which despite roadblocks, is still growing.
On the other hand, because the Fed is raising rates, the funding tide is no longer high. When the tide is lower—which happens every once in a while as the market ebbs and flows—you invariably find some folks swimming naked. Certainly, some enterprises were caught off guard.
You have likely seen a fair number of big names that were riding high on pandemic-driven usage waves. These businesses are definitely facing heat right now. For them, it’s time to go back to basics and regain profitability instead of chasing growth at all costs. Regardless, navigating hiring through the next several months doesn’t have to be an all-or-nothing strategy. For example, here are three strategies to stay calm and approach the economic uncertainty in a way that makes sense for your business:
1. Look at what the data is telling you. Don’t assume layoffs are the right answer without auditing the whole picture. Also, look at your existing talent landscape. Where can you nurture talent and restructure departments?
2. Be patient and welcome the change. Employers are getting back some of the leverage that they lost during the Great Resignation. But employees still prioritize flexibility, work/life balance and upward mobility. Instead of racing to hire, use this downtime to reevaluate your corporate culture, wellness and incentive plans.
3. Focus on future skills. When hiring resumes in earnest, know what skills you want to bring to the table. Will your organization need more AI/ML developers or more full-stack engineers? How are your teams thinking about sustainability? What about the Metaverse? This forced pause can be a time for reflection and reprioritization.
Once the noise settles down, I believe we will find that the ecosystem probably overreacted as it usually does, which is natural in high-stress moments. Tech hiring, for the last decade or two, has been on a spectacular rise, and I see no significant dent in that trend for years to come. Whether it’s Web3 or envirotech or some other major development, there is no end in sight for the success of tech and the people who build it.
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