Should we expect a second wave of layoffs?

Written by Technically Media CEO Chris Wink, Technical.ly’s Culture Builder newsletter features tips on growing powerful teams and dynamic workplaces. Below is the latest edition we published. Sign up here to get the next one this Friday.

In spring 2020, a seasoned tech CEO told me there would be two waves of pandemic layoffs.

First would come the quick adjustments: Companies that got squashed by the lockdown or the markets, and others that might recognize this as an opportunity to right size. A second wave would come, he told me, a couple years later. Sales channels would be disrupted. Some companies that retained staff in the first wave would transform their processes. Contract software development and web design firms in particular, and other organizations that operate under annual or other long term contracts generally, might have years of business development shaken.

Weekly jobless claims, used as a proxy for layoffs in the United States, have grown for three straight weeks again. The Delta variant already slowed U.S. economic growth, and between strained supply chains, labor market disruption and the waning effectiveness of vaccines, the virus will remain long after the pandemic has subsided. Some companies are booming; others are struggling. Many are somewhere in between. That’s what major economic disruption does.

This CEO saw it both during The Great Recession and the dot com bubble burst. In each case, nearly everyone was shocked by the initial collapse. Yet not many more were prepared for the aftershocks. In his case, the CEO told me it was more than a year after the immediate financial crisis of 2008 that business development disruptions showed up in slowing his growth.

Last year, even vaulted tech firms trimmed their workforces. Will a second round happen again this time?

The Delta variant still has many spooked that the U.S. economic recovery may be faltering. Despite many economic gains, the number of temporarily laid-off Americans has remained elevated at 1.3 million, according to the Bureau of Labor Statistics. That is considerably lower than the frightening 18 million from April 2020 but almost double the level in February 2020.

Employment in information (one representative BLS category for our purposes) grew by 17,000 in August, with particular growth from data processing and hosting companies. But that growth was slower than the month prior, and, believe it or not, the sector is still employing 150,000 fewer people than in February 2020. More targeted information technology jobs, including data scientists, software developers and engineers, are still growing rapidly — but the grand realignment continues.

I checked in with a handful of contract software and design firms. They still report strong business development pipelines. Last year’s short-lived COVID-19 pandemic recession is unusual in many ways, including how unevenly distributed the effects have been. Perhaps continued rapid digital transformation will allow much of the tech sector to avoid the worst of a second wave. Many are transitioning their workforces. (To respond, coding bootcamp Zip Code Wilmington added a data engineering course to its traditional Java curriculum.)

Not every organization needed to pivot over the last 18 months. Many did. If your organization does find itself needing to right-size or change your team, don’t consider yourself a strange exception. Your job is to run a healthy, thriving and effective organization that creates value and drives results. You may still be confronting the after-shocks, and others may be coming.

What did that CEO advise to do this year that he didn’t do during previous downturns? Don’t delay. Adjust your team for where your company is now. Focus on what your company needs, not what you think others are doing. Brace for the second wave.

And now the links.

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