why is Recession and Layoff happening in companies?

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 Why is Recession or layoff happening in companies?

 

What is Recession or layoff?

Recession actually means a period when the business and industry of a country is not successful. Recession happens when the business profit declines, slows down in the economy, negative growth in gross domestic product (GDP) and lags consumer’s confidences. Recession and lay off occurs simultaneously. A Lay off is termination of someone’s employment either permanent or temporary.

Why Recession happen?

The USA plays a major role in the world economy. If the economy of the USA slows down, then eventually the worldwide market will be affected. Many countries are interlinked and rely on international business to boost their economy. When the companies face negative growth, companies activate portfolio protection at any time to safeguard their gains and control losses. Labor is a significant cost for every business, when business incurred loss, it searches for the places to decrease the cost. In order to reduce the burden and free up cash, major companies laid off their employees to meet their profitability.

Reason for companies lay off:

1.     Negative development in economic         growth.

2.     Higher interest rates to battle inflation.

3.     Fear of possible recession for the next coming years.

4.     Uncertain market conditions.

5.     Employee headcount seems to be more as compared to consumer demand.

6.     Supply chain issue.

7.     High fuel costs.

8.     Decline in personal PC (productive call) sales.

9.     Hiring spree during the covid-19 pandemic.

Motive of layoff:

1.     Reduce labor cost

2.     Boost profitability

3.     Outsourcing roles

4.     Relocating the company to new location

5.     Improve outcomes

6.     To control the losses

7.     Protect gains

8.     Relieves the burden of payroll and free up cash

9.     Termination of inefficient workforce

10. To have effective and quality deals with consumer

Indication the company is about to layoff:

1.     Freezing payroll or promotion and hiring.

2.     Reorganizing departments or teams.

3.     Unexpected change in business policy.

4.     Limit the work or unexpected project cancellation.

5.     Further cost cutting techniques.

6.     Enhanced internal communication.

Who was affected by layoffs?

According to layoffs.fyi, a website that tracks layoffs in the tech industry since the beginning of covid-19 pandemic.

Tech companies – especially the giants were on a hiring spree during the pandemic as the world moved online. Nearly 90% of big tech firms are headquartered in the USA. Many layoffs from large tech giants were software engineers.

Around 1057 tech companies about 164,709 employees were laid off in 2022. In 2023, 715 Tech companies had about 199,889 employees laid off. It still might continue their layoff process. Companies like Meta, Amazon, Twitter, Better.com, Alibaba, Google, Alphabet, Microsoft, Oracle, Intel Habana labs, Asana, HP, Cisco, Stripe, Docusign, Ericsson, and Twilio. Startups like Skit.ai, Dunzo and many companies on list.

As per comprehensive study by 365 Data science, largest group of laid- off employees did not hold tech jobs

27.8% of HR and Talent sourcing Employees

22.1% of Software Engineers

7.1% of Marketing Employees

4.4% of PR customer services Employees

Age wise:

47.8% within 30-40 years

35.9% was 20-30 years

Gender wise:

56% of female employees

43.8% of male employees

0.2% of preferred person

Work Experiences:

The average work experience of those laid off was 11.9 years.

Education:

59% Bachelor degree

30% Master degree

4% PhD

1% MBA

5% hadn’t added higher education.

Layoffs are possible in the growth stage. Startup companies who recently hired bulk and expensive AI/ ML/ Data engineering folks who are paid heftily they laid off their employees.

How to survive? (Opinion to employees)

1.     Try to skill up, highly efficiently.

2.     Expand your network.

3.     Research thoroughly the company stability before joining.

4.     Good connect with company and team.

5.     Avoid frequent switching of companies.

6.     Try to shift from service to product based MNCs.

7.     Have your 6-8 months of emergency fund ready.

8.     Stay relevant to your company.

REFERENCES:

 https://https://hbr.org/2023/02/5-signs-that-a-layoff-is-coming

www.forbes.com/advisor/in/investing/what-is-a-recession/

https65datascience.com/trending/who-was-affected-by-the-2022-2023-tech-layoffs/

https://m.economictimes.com/news/new-updates/layoffs-2023-why-are-tech-superpowers-laying-off-workers

https://en.wikipedia.org/wiki/Quora

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