With all the doom and gloom in the air over record inflation, unstable governments, war. There is a lot of reasons to think IT jobs in general are under threat. With all the MACRO issues in the world. Companies have a right to be worried about recessions and protect their business. Sit on their hands if you will. This type of mentality more stagnates jobs, doesn’t necessarily mean IT jobs are under threat. Just means there is a hold on investment for example. There are still plenty of customers that need to be served and products to be built. Businesses are just doing it with less funds. But, yes companies are laying off people.

Here are my 5 reasons why IT jobs under threat?shocked at IT job sector

  1. Record valuations – Market over cooked
  2. S&P 500 is down over 10% year to date – in 2021 for example it was up 28.71%
  3. Consumer spending is concerning due to high inflation
  4. Using it as an excuse to get rid of under performers
  5. Interest rates – Businesses were able to get their hands on cheap cash.

Moving away from the Irish IT job market for a minute. The US jobs market has shown the biggest layoffs or redundancies. Netflix for example is feeling the aftermath of their miserable user figures. Disney+ leapfroged it to become the largest streaming platform. Netflix lost a record 200,000 subscribers and with that 300 jobs as they cut costs to “invest in other areas”

Netflix are not alone, we have seen businesses that experienced rapid growth during the Covid Pandemic with businesses such as Robinhood, DocuSign and Glossier trim down headcount to cut costs as users balance out after hyper inflated growth.

So what’s going on with valuations in the Tech sector, why is that important for the IT Jobs sector?

Last year was a record in terms of funding and venture capital with an eye watering $643 billion invested, compared to $335 billion for 2020—that’s a 92 percent growth year over year.  If you think back to 2012, the figure was closer to $59 billion. With the Nasdaq in decline and this year has seen it drop 13.5% since the start of the year. This is generally how businesses are valued. As the high valuations of 2021 start to drop, businesses start to consider there funding efforts due to the lower or perhaps more realistic valuations realign. Of course, there are exceptions to the rule, some of the best businesses seeking funding still command record valuations (Don’t get me wrong).

A good example of this would be Only Fans, in Sept they recorded $4.8 billion in revenue off a valuation on the last funding round of $1 billion. Now they give 80% of there revenue to content creators and 188 active users.

With less funding naturally these businesses must look elsewhere for money to fund there day to day operations and cutting jobs is one way to do that. As a Recruiter I have spoken to countless job seekers who are going through this right now. Noncritical projects get paused or shelved, some upgrades or scaling projects become over staffed which results in the redundancies. It is a great test of these businesses but does nothing for the IT market.

How is this affecting the IT jobs market in Ireland?

Lets start with PayPal. In May 2020 PayPal announced they would be slashing 300 jobs. These jobs are mixture of multi lingual, technical support, customer support and IT jobs. All lost in Dublin and Dundalk. PayPal said they were downsizing based on operational needs. In other words, not as many people are using PayPal as they did in the past and we don’t have the work for everyone. PayPal over the last few years has seen their stock go from $268 in Oct 2021 to $94 in Oct 22.

PayPal are not alone on this, as mentioned the Nasdaq as fallen steeply over the last year prompted by poor results, user declines, overspending etc. Businesses are starting to tighten their belts. However, some analysts are expecting a further crash. If you take Tesla for example. At its peak Tesla was valued at $407 per share, in October of 2021 Telsa had a Market cap exceeding $1 Trillion. So, it was joining ranks with the likes of Google, Microsoft and Amazon. Investors just kept buying it on the expectation it was just keep rising, which it did for a long period of time.

When you break it down, the business is still to record a profile. Its revenues in 2021 were $53 billion an incredible 70% rise from 2020. In 2022 we are seeing good results again. The valuation has come back down to closer to $746 billion but that is still huge, but it prompted a 3.5% cut in jobs. In the same period, they sacked people who recently started and withdrew offers for pending starters.

Thankfully those roles are not in Ireland, but it gives an example of valuations that are not sustainable. I’ve not double Tesla will continue to grow into that valuation as there EV cars continue to roll out in record numbers.

In a survey recently created by Manpower 23% of Tech companies in Ireland are planning layoffs. But there is a bright side of course, 25% of IT companies expect to hire. We are also seeing the likes of Meta freeze Recruitment (Another company that has seen huge changes to their valuation). Now, freezing Recruitment for a business like Meta is a big deal. They are unlikely to replace IT jobs from people who seek a new challenge. They are also undertaking more stringent annual reviews, performance reviews and expect people to be released based on performance (That IT job won’t be replaced remember). With similar happening in large businesses all over the country are we likely to see more talent enter the market? Only time will tell, but I suspect the IT skills shortage will remain as grim as ever.

The list goes on from businesses that are trimming workers, the darling of Irish start-ups, the first Irish Unicorn Intercom, yes is not hiring and trimming around 50 people from there 1000 strong staff here in Ireland. They say there are growing but not as fast. So they are trimming down to seek higher profits. The list does go on, social media group Snap (or snapchat) recently announced it would cut 20% of its 6,500-strong workforce globally as it battles a slump in advertising (where its revenue comes from). Klarna, Shopify, Flipdish, Rent the Runway and Peloton have all announced they would cut back on staff in recent months as the economic doom and gloom continues to rock the once unbreakable tech sector.

If you have been affected, it’s been a while since you updated the CV, check out our blog on that here. Also a few interview tips never run astray, click here for more details.

For those businesses that have a more positive outlook. Elwood Roberts is well placed to help you some of our products are right here. A simple email or call will also work and we will be right back to you.