Tech companies pull back on hiring, flashing another grim warning sign for the U.S. economy

Key Points
  • Despite the massive shift to remote work and the surge in demand for certain online services, the tech industry has seen a widespread drawdown in job listings.
  • Jobs openings nationwide across the industry dropped more than 20 percent between mid-March and mid-April, according to analysts at Glassdoor.
  • The pullbacks have been especially acute among private e-commerce companies, according to Thinknum Alternative Data. Many software firms, on the other hand, have increased postings or kept hiring relatively steady.

Tech companies have pulled back sharply on hiring, adding to the cascade of negative economic shocks caused by the coronavirus outbreak.

It's been roughly one month since the country's first stay-at-home order came down in the San Francisco Bay Area. In the weeks since then, shutdowns to control the pandemic's spread have unleashed havoc on industries ranging from retail to travel and tourism. The pace and scale of the economic damage have been striking. An additional 4.4 million Americans filed for jobless claims last week, bringing the total to 26 million over the past five weeks. And some economists are predicting the U.S. unemployment rate could soon eclipse 30% — up from a 50-year low of 3.5% in February. 

On the other side of the ledger, hiring trends are painting an equally distressing picture. And, despite the shift to remote work and the surge in demand for certain online services, tech is not immune to the pullback.

Jobs openings nationwide across the industry dropped more than 20% between mid-March and mid-April, according to analysts at Glassdoor.

"A lot of attention has focused on the impact of service workers," Daniel Zhao, senior economist at Glassdoor, said. "But the fact of the matter is that there isn't any industry that is immune to the effects of the outbreak. And the tech industry has to figure out how to adapt like every other industry." 

The drawdowns have been especially acute in the Bay Area and in the sub-sector of internet and technology — including companies like Pinterest and Yelp. These platforms have reported significant bumps in user engagement, but they have been offset by a sharp slowdown in advertising spending. Even more traditional roles seem to be on precarious footing. Postings for computer software, hardware, and IT jobs have all dropped double digits between mid-March and mid-April.

Hardware, fintech and start-ups under pressure

Between the rise in online grocery shopping, heightened focus on cloud computing, and seemingly insatiable demand for videoconferencing tools, some tech companies have benefited as more people turn to their services while sheltering indoors. 

Overall, though, it's been difficult to find many companies ramping up hiring efforts, according to data supplied to CNBC by Thinknum Alternative Data, a research group that tracks job listings posted online by both public and private companies. Those figures are aggregated from companies' recruiting, HR, and careers websites.

The range of businesses slowing hiring reveals the depth of the coronavirus-induced shock to demand.

Between Jan. 1 and April 15, well-established hardware companies like Analog Devices, Dell Technologies, Intel, and Micron have all cut postings between 30 and 60%. Over that same time frame last year, the companies either increased listings or held fairly steady.

"Like all businesses right now, we're scrutinizing all hiring and keeping a focus on preserving team member jobs," a spokesperson for Dell told CNBC. "We're honoring all offers that have been extended and remain committed to our early-in-career talent programs, like summer internships."

Even industries seemingly poised to benefit amid strict social distancing measures have seen wide pullbacks in job postings.

Cybersecurity infrastructure seems as important as ever with more and more people working from home, but those companies aren't necessarily ramping up hiring.

Of the top 10 most valuable public cybersecurity companies tracked by Thinknum, six have reduced the number of job postings since the start of the year. Two of those firms have held steady, while just two have added to their job boards. 

Fintech has seen one of the starkest divergences in hiring trends.

Some firms have benefited from the shift to digital and contactless payments, like PayPal. The company nearly doubled the number of job postings between Jan. 1 and April 15. During that same period last year, listings actually declined.

But hiring at some of the most highly valued financial tech start-ups like SoFi and Stripe are down double digits since the start of the year. A spokesperson for SoFi noted that was, in part, due to a recent change in how the company categorizes job postings on its site. Economists say the overall trend, though, underscores tighter financial conditions in the market.

It's not just fintech start-ups feeling the heat. Top tech start-ups from data-analytics software company Palantir to shopping platform Wish have lowered their number of job postings. 

Overall, of the 219 privately held tech companies with valuations of $1 billion or more ("unicorns") that are tracked by LinkedIn, supply chain logistics and delivery companies are slowing the fastest, with a decline of 72% in job postings. Travel start-ups have also been slammed, with listings down 47% just between February and March. 

"The question is what kind of employers can continue hiring during a downturn like this," Glassdoor's Zhao said. "When you look at start-ups, you don't have a lot of cash on hand. They can't necessarily weather the downturn and continue hiring into the crisis."

LinkedIn Hiring Rates

Amazon is hiring, other e-commerce companies are slowing

With non-essential stores closed and large swaths of America still sheltering in place, more consumers are shopping online and more frequently, putting Amazon into the national spotlight — and making it a rare exception to the tech hiring slowdown. The company filled 100,000 new positions it created last month, and said it plans to hire 75,000 more warehouse workers.

Amazon is currently advertising for over 37,000 roles across the company, and is rapidly scaling in roles around its growing supply chain and worker safety.

"Medical, Health, and Safety" job postings have risen more than 80% in 2020 and are up three-fold year-over-year. Meanwhile, job listings in 'Fulfillment and Operations Management', which include roles in managing or working with shipments, have increased more than 55%.

But most other e-commerce companies are showing the opposite trend. Spending priorities have shifted, and some critical customer bases have fallen off completely.

Between Jan. 1 and April 15, Wayfair and Grubhub reduced listings 73 and 94%, respectively. And that can't just be attributed to aggressive hiring goals in the first quarter. Both companies added postings during the same time frame in 2019, according to data from Thinknum.

Grubhub has attracted a record number of new diners and new restaurants in certain markets, but that has been overshadowed by a dramatic drop in corporate business. The food delivery company withdrew its full-year guidance earlier this month. Wayfair, said sales growth has doubled between March and April, but that isn't showing up on the job boards.

It's tough sledding on the private side, too, especially for trendy direct-to-consumer brands. Away and Warby Parker, for instance, have both slashed postings by 70%. They accelerated hiring during the same period last year.

Away, the New York-based travel brand that fetched a valuation of $1.4 billion last year, said in a post earlier this month that sales had plummeted more than 90% amid the coronavirus outbreak.

"It is not only hard to do business during a global pandemic — for us, it is nearly impossible to continue our mission of transforming travel when travel has come to a halt," Away founders Steph Korey and Jen Rubio wrote.

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Reasons for optimism

Still, analysts say, there are some reasons to be optimistic about the industry. 

Job postings for roles in tech have declined less than in other industries, according to Jed Kolko, chief economist at Indeed — the biggest hiring platform by traffic in the U.S.

Job postings on Indeed, across all industries nationwide, fell 31% between Feb. 1 and April 10 versus the same time period last year. Listings in hospitality and tourism, the hardest hit sector, have plunged 63%.

By comparison, postings for two particular types of tech jobs — information design and software development — are down only 25% and 26%, respectively. 

Tech is showing more resilience than other industries in part because these companies are staffing up to support the infrastructure for large remote workforces, according to Guy Berger, principal economist at LinkedIn.

"Across the economy, business is down, people have less money to spend, and financial conditions are tighter, but companies that are doing relatively better are providing essential or near-essential tech services," Berger said. "That's things that people need to videoconferencing and working online."

That confluence of factors has boosted some software names like Slack, Twilio, Adobe, and Salesforce. According to Thinknum, between Jan.1 and April 15, all four companies have seen job listings jump between 20 and 40%.

Some of the industry's most valuable and well-known players, like Apple and Facebook, have also kept hiring relatively stable versus last year. Facebook said last month that total messaging across its platforms surged 50% in countries hit hard by the virus. Video messaging more than doubled.

Even Alphabet subsidiary Google, which said it plans to slow hiring for the rest of 2020, had increased job postings by 17% between Jan. 1 and April 15.

These are signs, Glassdoor's Zhao says, that perhaps, amid the uncertainty, prospective workers are looking toward bigger companies with more cash on hand, seen as safer bets compared to start-ups.

"Whenever you have a downturn like this, financial security and job security come to the forefront in everybody's mind," Zhao said. "What that means is that people will prioritize job and financial security and look to work at companies that are more stable and more established."

He added that, in the company review sections on Glassdoor's site, smaller tech firms are seeing the biggest increase in discussions around layoffs. 

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Looking toward re-opening

As cities and states debate relaxing social distancing restrictions and companies begin to plan for a phased return to the workplace, many economists have their eyes trained on job postings.

During the past few months, according to Indeed, the metros that have seen the biggest decline in job listings overall are travel destinations and hubs of hospitality and tourism: Honolulu, Miami, Orlando, and Las Vegas.

The impact of hiring trends in tech, however, falls disproportionately on the Bay Area. And tech hiring patterns also have ripple effects across other sectors that rely on the industry. 

"When we think about tech workers in the tech industry, a lot of us imagine software engineers or data scientists or product managers, but there are a lot of folks who are in non-technical roles in the tech industry," Glassdoor's Zhao said. "That's everything from marketing managers to administrative assistants to the staff that is helping clean and maintain the buildings. So, there really is this widespread impact."

LinkedIn's Berger said the Bay Area experienced a massive shift across the entire labor market last month. In March, hiring across all industries in the region was down 4.8 percent from February and down 9.1 percent compared to March 2019. 

That economic damage has extended to the state level, too. According to CNBC research, California leads all states with 3.4 million jobless claims filed over the course of the last five weeks. It's also the third hardest hit state, with 17% of the labor force seeking unemployment.

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A rebound in hiring and economic activity — in the Bay Area, across California and throughout the country — hinges on expanded public health measures, most notably a massive pickup in testing. It will also depend on how fast the tech industry, which accounts for an estimated 10% of the U.S. economy, can get back on its feet.

"The industry has suffered a particularly acute labor shortage in the last few years, and I think employers are still feeling that," Zhao said. "There's still a psychological tick in people's minds that they need to be able to compete for labor. I actually think that, once this crisis is over, you'll see hiring ramp up fairly quickly in the tech industry just because people have this memory of a very tight labor market."