Arjuna Kodisinghe - stock.adobe.

Tech company layoffs end tech's growth streak

For the first time in two years, tech employment didn't grow in January, thanks to tech company layoffs. But the shift to digital services may keep tech employment growing.

Tech company layoffs have finally taken a toll on tech employment's sustained growth. The overall number of people employed in tech declined in January for the first time in about two years, according to two analyses of U.S. labor data. But the decline may be short-lived.

Demand for tech workers in most industries remains strong. Many of the tech companies that laid-off workers pointed to their rapid headcount expansion during the COVID-19 pandemic as well as economic uncertainty as the culprits. This week, Zoom provided the latest example of this trend.

On Tuesday, Zoom said it is cutting around 15% of its workforce or 1,300 employees, informing affected workers via email. In 24 months, the company grew three times in size, said Zoom CEO Eric Yuan in a letter to employees.

The tech market is now losing jobs; in January, it lost 4,700 positions, according to labor market analyst firm Janco Associates Inc., in Park City, Utah. CompTIA, an industry group in Downers Grove, Ill., put the decline at nearly 2,500 positions in January. Labor market analysts often use different occupational mixes when calculating gains and decreases, accounting for the differences in estimates.

Victor Janulaitis, CEO at Janco, still expects tech company hiring to increase this year, with most of it occurring later in the year. "There are too many strong down winds right now on the economy," he said.

Digitization grows IT

While hiring in the tech industry may be stagnating, other industries are adding IT workers, said David Wagner, senior research director at Avasant in El Segundo, Calif. Before the COVID-19 pandemic, it was different.

Wagner said that almost every year from 2014 to 2021, IT headcount was flat because cloud and SaaS applications were shifting support jobs out of IT organizations. But in 2022, thanks to the pandemic, more companies began rapidly digitizing services, and IT departments grew.

Avasant surveyed 110 companies' IT operational budgets of more than $1 million from November through January and found that IT headcount was projected to grow in 2022 by 5%.

The rise in IT hiring was due primarily to the "increased pace of digital transformation and the positive impact the pandemic had on the perception of IT as a revenue producer rather than a cost center," Wagner said.

Wagner said IT department hiring is forecasted to increase this year but at a slower pace. Avasant's survey shows that 52% of IT departments expect an increased headcount.

The data signifies that IT is still a priority, according to Wagner. This change is due to a shift in thinking at businesses about the value of technology. There is a "perception that IT can be a strategic advantage," he said.

Patrick Thibodeau covers HCM and ERP technologies for TechTarget Editorial. He's worked for more than two decades as an enterprise IT reporter.

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