Goldman Sachs is pushing back on the notion that headline-grabbing layoffs from big-cap tech companies are a sign of a looming U.S. recession.
"Tech layoffs are not a sign of an impending recession," Goldman Sachs chief economist Jan Hatzius wrote in a note to clients on Tuesday.
As the year nears a close, the layoffs announcements have picked up in tech land amid a terrible year for stock prices and slowing growth.
In the past two weeks alone, Meta and Amazon have unveiled combined job cuts of 21,000 following soft third quarters.
Twitter cut 3,700 employees as new owner Elon Musk hits reset on the social media platform's business.
Hatzius calculated that there have been 34,000 announcements of layoffs from large-cap tech companies in November (chart below).
Nevertheless, the long-time Goldman economist listed three reasons why these layoffs are not a sign of gloomier economic times ahead:
Tech doesn't dominate the jobs scene.
"First, the tech industry accounts for a small share of aggregate employment — for example, the unemployment rate would rise by less than 0.3 percentage points even in the inconceivable event that all workers employed in the “internet publishing, broadcasting and web search portal” industry are immediately laid off — so any drag on the overall labor market should be small."
Tech is still hiring.
"Second, tech job openings remain well above their pre-pandemic level, so laid-off tech workers should have good chances of finding new jobs."
History as a guide.
"Third, tech worker layoffs have frequently spiked in the past without a corresponding increase in total layoffs and have not historically been a leading indicator of broader labor market deterioration, and layoffs in other industries still look limited."