Mary Hainds had been working in sales at a small construction technology startup for about six months before she was laid off in October. In the weeks that followed, she interviewed for other tech sales jobs in earnest and received job offers.
“I think there are still opportunities out there,” said Hainds, who lives in Chicago’s Uptown neighborhood.
Still, she sees clear signs the market is cooling. Two companies she had recruiting calls set up with told her they were going on hiring freezes. And she’s seen job postings with salaries lower than she’s seen for the same positions before.
“If you don’t kind of guard your heart and eyes it can feel like it can be hopeless,” Hainds said. “But I think the tech industry has been hit — but not all industries have been hit.”
As layoffs at tech industry giants made headlines in the fall, U.S. employers added 263,000 jobs in November, with unemployment staying near a 53-year low. Most economists who spoke with the Tribune didn’t think tech layoffs were a harbinger of mass layoffs across all industries. But as consumer habits change, some companies are feeling the pain more than others.
“The winners of the pandemic are all of a sudden becoming the losers,” said Diane Swonk, chief economist at KPMG U.S.
That includes Big Tech, which bulked up on labor during the pandemic as people moved their lives online. In November, tech industry giants such as Meta, Twitter, Amazon and Lyft all laid off, or announced plans to lay off, sizable chunks of their staff.
“I think there was a certain belief within the sector that you know, this is really not just a blip. This is a major change in the way people are going to live their lives,” said Peter Bernstein, chief economist at RCF Economic & Financial Consulting in Chicago and an economics instructor at DePaul University’s Driehaus College of Business. “And they may have gotten ahead of themselves a little bit.”
Meta said it would lay off 11,000 employees, or 13% of its workforce, in early November. When the company hosted a grand opening for its new Loop headquarters over the summer, it had about 500 employees at Meta Chicago, a spokesperson told the Tribune.
Amazon CEO Andy Jassy wrote a note to employees in mid-November describing the behemoth’s decision to cut jobs in its devices and books divisions. “There will be more role reductions as leaders continue to make adjustments,” he wrote. In the grips of Elon Musk, Twitter laid off 50% of its staff and continued to bleed employees throughout the late fall.
Cisco, which opened a 130,000-square-foot space in the Old Post Office in July and has about 1,000 employees in the Chicago area, is also making cuts. In a statement, a company spokesperson said the cuts were not about cost savings.
“We’ll have roughly the same number of employees at the end of this fiscal year as we had when we started, and we will do everything we can to help place affected employees in other open roles,” the company said, adding it would offer those impacted “extensive support, including generous severance packages.”
The tech companies did not answer questions about how many people in Chicago were affected by layoffs.
Over the last several years, Chicago has championed growth in its tech industry. This summer, a Chicagoland Chamber of Commerce study found tech job development in Chicago had grown by 18% over the last decade. Tech jobs represent 8% of the city’s workforce, the study found. That percentage included workers at tech companies in both tech and non-tech roles, as well as tech workers in non-tech industries.
“So much of the conversation gets dominated by what’s happening in Silicon Valley,” said Todd Thibodeaux, CEO of the tech industry group CompTIA. “That’s really a small fraction of employment in the industry broadly.”
In November, Chicago was the third top metro area for tech industry job postings, after Washington, D.C., and New York, according to CompTIA.
The Chicago area saw a decrease of about 670 tech job postings from October to November, according to CompTIA. New York lost more than 6,000 job postings, and Washington lost nearly 2,000.
Still, Thibodeaux said that despite layoffs, the overall jobs picture in tech was more complicated.
“You have 150,000 plus smaller tech companies who are dying for people to expand their businesses to provide cybersecurity services, to be able to provide cloud data services, to be able to provide networking services, customer support, technical support,” Thibodeaux said.
The overall jobs picture is still somewhat rosier than the situation in tech, although the Federal Reserve’s plan to keep raising interest rates in an effort to combat inflation have continued to raise fears of a recession. In November, the unemployment rate in Illinois increased by a tenth of a point to 4.7%.
Sectors adding the most jobs that month included leisure and hospitality, professional and business services and educational and health services, while the sectors with the largest declines included trade, transportation and utilities, government and manufacturing.
As the Fed has continued to raise interest rates, most recently in mid-December, some of tech’s trouble may be because it is more vulnerable to changes in risk perception than other industries.
“As interest rates continue to rise, investors just get particularly worried about risky investments, risky projects and risky stocks,” said Matt Notowidigdo, a professor of economics at the University of Chicago’s Booth School of Business. “And tech by its very nature is a risky enterprise.”
Other industries that are already being affected by high interest rates include the housing and housing construction industries. Mortgage lenders are losing ground already, Swonk said. In Illinois, Rosemont-based Interfirst Mortgage said in state-mandated filings it planned to lay off nearly 200 people, with additional layoffs coming at the beginning of 2023.
The construction industry is still adding jobs — in Illinois, construction added 2,400 jobs between October and November, according to seasonally adjusted data from the Bureau of Labor Statistics — but Swonk expects to see layoffs in housing construction going forward.
Despite trouble in tech and housing, most economists who spoke to the Tribune did not expect to see widespread mass layoffs this year. That’s in part because many sectors of the economy are still recovering from the pandemic recession, Bernstein said.
“That’s a positive to the extent that they’re recovering,” Bernstein said. “That is essentially one of the forces adding jobs to the economy.”
Skills for Chicagoland’s Future, an organization that connects unemployed or underemployed prospective workers, mostly from the city’s South and West sides, with Chicago-area employers, is still seeing strong demand for workers in sectors such as health care and hospitality, said Pam Tully, chief program officer.
“When we talk about some of the more business, banking, consulting services kind of organizations, that we’re starting to see a little bit of a slowdown, but nothing drastic yet,” she said.
Robert Johnson, chief economic inclusion officer and general counsel for YWCA Metropolitan Chicago, which runs job training programs and helps to connect prospective workers with jobs in industries like manufacturing, construction, information technology and health care, also said the organization hasn’t seen a slowdown in hiring.
The YWCA has seen some increase in demand for its jobs programs, Johnson said. That’s not because people have been laid off, but because inflation is making it harder for people to live off their current incomes, he said. Johnson said the YWCA has observed wages going up “slightly, not dramatically.”
Nationally, wages are up 5.1% over 2021, according to the Bureau of Labor Statistics. Though inflation cooled more than expected in November, prices were still up 7.1% over the prior year. That means the average person is seeing a drop in their real earnings, even if they are making more money.
“Folks are looking for an opportunity to find a better job, or to get a second job,” Johnson said.
While the Fed is raising interest rates in an effort to combat inflation — higher interest rates make it harder for people to borrow money, which is intended to cool demand and lower prices — doing so could lead to a recession and cause more people to lose their jobs, economists said.
“I don’t think it’ll be to the degree that we saw in 2008 and the Great Recession. But it will be a recession,” said Phillip Braun, a clinical professor of finance at Northwestern University’s Kellogg School of Management.
Some companies may be avoiding layoffs for now because of how difficult it was for them to attract workers in 2022, said Tom Gimbel, CEO of the Chicago-based recruiting firm LaSalle Network. The recruiting firm works with companies that range from startups to Fortune 500 companies.
“They saw what happened when they laid people off so quickly in March of 2020 and April of 2020,” Gimbel said. “They don’t want to be caught with their head in the sand.”