- [Narrator] Amazon, Ford,
Pepsi, and more from Amazon.
These are just a few of the companies
that have said they were starting big layoffs
in the last year.
Some job cuts are expected
when the economy hits a rough patch,
but this is different,
not because of the number of people being laid off,
but because of who.
- We're seeing a really unusual situation
where white-collar professionals are being laid off
in greater numbers relative to the rest of the workforce.
- [Narrator] Here's why white-collar jobs
are getting cut first,
and why that's a departure from slowdowns in the past.
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Ever since this wave of job cuts started last year,
experts have said that this downturn could spell trouble
for professional workers.
- This recession is gonna be really bad,
not only for white-collar workers,
but white Patagonia vested workers.
- [Narrator] But to understand why those cuts are happening,
we have to go back even further
to the beginning of the pandemic.
As the economy went into crisis mode,
layoffs hit a lot of industries,
but ones that are not predominantly white-collar
were some of the most affected.
Entertainment, and leisure,
and retail which hire a lot of low wage
and frontline staff made up most of the job cuts
in the first seven months of 2020.
- In-person workplaces, everybody got sent home,
and so you had a lot of white-collar workers
who could do the kinds of jobs that companies still needed
in great quantity.
And companies like Zoom boomed,
companies like Google and Microsoft,
suddenly their products were in much greater demand.
- [Narrator] As the economy started to recover,
some industry saw the average number of employees grow
from pre-pandemic levels, while others,
especially those with frontline workers,
grew only a little bit or were left at a deficit.
But as employers are now making job cuts
amid rising interest rates,
they're facing two major problems.
For some, it's an excess of white-collar workers
who may have been hired for special projects
or company expansions during the pandemic.
- Some of those projects have been closed, or pulled back,
or narrowed, and so companies that hired a lot
during the pandemic are just finding
they don't need as many people.
- [Narrator] But elsewhere,
there's an unmet demand for workers,
namely in blue-collar,
low wage, and frontline jobs.
- It feels like we have
a structural labor shortage out there where there are,
you know, 4 million fewer people,
a little more than 4 million,
who are in the workforce available to work
than there's demand for workforce.
- [Narrator] The Fed says the shortage has multiple causes.
Some of it is due to more people going into retirement,
but other factors like slowing immigration
are also playing a role.
Some economists also say that mindsets
about work have shifted amid COVID-19 for these workers.
If we look back at that change in employees on payroll,
some of the industries that have had
a harder time recovering are ones
that a lot of workers didn't return to.
- And companies don't want to risk being unable
to fill important jobs as the economy speeds up again.
So they're being careful about keeping those workers,
some people call it labor hoarding,
they're actually holding onto these people,
trying to keep them from leaving,
even if they don't need them all right now.
- [Narrator] As hiring has started to slow,
ads for jobs in white-collar industries
have fallen the most.
And as for layoffs.
- White-collar workers are there, they're paid more,
so job cuts can save you more money with fewer people,
and you don't risk giving up
those hard to find frontline workers
that you're gonna need when the economy improves.
- [Narrator] But this breaks from the norm
of what has happened in many other economic slowdowns.
Usually.
- First capital intensive industries lay people off,
factories and construction companies,
then you see companies with large low wage workforces,
retailers, hospitality companies,
restaurants and hotels.
And only later, as the economy really starts to slow
and as a recession looms or kicks in
are professional workers
and white-collar workers usually laid off.
- [Narrator] Just look at the recession in the early 1980s
where blue-collar workers made up 75% of layoffs.
- It's few and far between, jobs are hard to come.
But how about you, you hiring?
- [Narrator] And even more recently, in 2007,
just before the start of the great recession,
blue-collar industries like construction and manufacturing,
were some of the first to start losing jobs.
By the end of 2008 when mass layoffs were gaining steam,
industries that are not predominantly white-collar
were some that had the most job cut announcements,
that's excluding finance, which was in a crisis.
- So the classic model we've seen over
the past 38 to 40 years is that when companies
see a slowdown coming, they shed workers.
They figure, you know,
we can always hire them back once business picks up again.
But that didn't happen after the pandemic.
- [Narrator] But even if white-collar workers
are mostly affected by this downturn,
they don't typically stay unemployed for long.
The majority of tech workers who were laid off
this year landed a new job
within three months of starting their search.
- Some smaller companies are finding it easier to hire now,
because you know, there's more people on the market.
So just because there's a lot of layoffs
doesn't mean no one's hiring.
- [Narrator] Despite the layoffs,
the job market remains strong by historical standards.
The Fed is still looking for it to cool further.
- The economists I've spoken with expect more layoffs.
They don't expect it to be like in the financial crisis
when you saw pretty widespread layoffs,
but they do expect layoffs to spread from, you know,
tech and the white-collar
to other areas where the economy may slow down next.
- [Narrator] Some economists say that layoffs
could become more precisely targeted at underperformers,
as companies try to hold on to
their most valuable employees.
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