Why is the job market becoming so volatile?

Flash back to 2020, when the pandemic had struck and lockdowns were imposed all over the world. The period had witnessed a tech boom. With most companies working remotely, the need for digitisation of processes for the continuity of the business was felt by one and all. While there were some instances of layoffs in some sectors, many companies managed to sail through the pandemic more or less by cutting people’s salaries. While some sectors struggled to make ends meet, others flourished.

The information technology (IT) and tech products sector saw a major boom and the focus on growth plans increased like never before. Even the education tech sector in India speculated major growth during the lockdowns and hired in huge numbers. In fact, businesses were talking about a huge talent crunch and ‘The Great Resignation Days’ became a hot topic of discussion.

Coming back to the present, companies who were once hiring in hundreds and thousands, especially during the first two years of the COVID-19 pandemic, are now cutting jobs.

All the big tech and tech product firms are laying off people in significant numbers. Microsoft, Google, Tesla, Snapchat, Twitter, Uber, Facebook and more have either slowed down hiring or have laid off employees. In India, companies such as Ola, Blinkit, BYJU’s, Unacademy, Vedantu, Cars 24, MPL and Lido Learning are amongst the brands that have cut jobs.

“We will see an impact on jobs across businesses, but the magnitude of the impact will vary”

Ramesh Shankar S, senior HR leader

As per media reports, in 2022 alone, more than 20,000 people have lost their jobs in the US and about 12,000 employees in India have been impacted so far. Interestingly, some of the very companies that were hiring in thousands in the last two years basis growth prospects, are now firing employees left, right and centre.

Dara Khosrowshahi, CEO, Uber, also mentioned in one of the internal memos to employees that the Company will slow down hiring since the business is not growing as was anticipated earlier.

There are many factors at play here.

Political conditions: The geopolitical situation in Europe, with the Ukraine-Russia war, has led to major inflation in Europe and the US. Many economists predict that the US market will be hit by recession the likes of which the world has never seen before. Companies such as Tesla decided to cut 10 per cent of the workforce as Elon Musk, CEO, Tesla, admitted that he did not have a good feeling about the economy in the near future.

Funding winter: In India, however, it is mostly the start-up ecosystem that is being impacted along with the education tech sector. The way the economic situation has panned out in the West, there is a huge funding crunch or ‘winter’ in the startup ecosystem in India. As a result, many startups have been unable to sustain and have had to let go of people.

Return to office & reopening of schools: Ever since the opening up of schools and institutes, companies in the edtech space have been facing challenges, being unable to grow at the pace they had originally expected to grow in.

Impulsive hiring: “We can say that these businesses did not hire smartly during their peak days. They were too impulsive in hiring people then, only to lay them off later in their bad times,” enumerates Udbhav Ganjoo, head – HR, global operation, India, emerging Asia & access markets, Viatris.

Ramesh Shankar S, senior HR leader, admits this is not something new. History has been witness to many businesses thriving and expanding rapidly amidst demand surge and then deteriorating with a drop in demand. They then resort to cost cutting and layoffs. For instance, in the ed-tech sector in India, during lockdowns, when schools were shut, the demand for online learning tools increased. However, when schools re-opened, the demand went down and the business failed to grow as expected. “This is quite natural. It happens in all businesses. At one point, there is a peak, and then slowly the demand for products starts falling,” says Shankar.

Ganjoo says that companies need to hire smartly while they are expanding. “Smart hiring for me would be hiring with caution and expanding one’s manpower capabilities as per the business plans, taking into consideration all external and internal factors that can create an impact,” asserts Ganjoo.

“We can say that businesses did not hire smartly during their peak days. They were too impulsive in hiring people then, only to lay them off later in their bad times”

Udbhav Ganjoo, head – HR, global operation, India, emerging Asia & access markets, Viatris

“I do not believe in the idea of mass hiring, that is, hiring people in huge numbers at one go. Hiring in phases is a much better option,” opines Ganjoo. He also suggests that we should not forecast business expansion too quickly and end up hiring people in advance for roles that we need in the future. What if that future never really becomes a reality?

Short-sightedness: “Nowadays, businesses have very short-sighted plans. They think quarter to quarter, which actually results in such mass layoff scenarios,” points out Shankar.

He goes on to state that now even CEOs are hired for very short periods of time. When the desired results fail to show, they are asked to leave.

Since the US market is experiencing rising inflation and a major recession is predicted, India will be impacted as well. As per HR leaders, right now it is the start-up ecosystem that is witnessing more layoffs and job cuts. However, as we all know, there is a value chain, and slowly, sectors such as e-commerce, BFSI, manufacturing and FMCG will also start seeing an impact. If people begin losing jobs or taking salary cuts, their purchasing power will go down. This will impact the consumer goods businesses as well.

“While there will be an impact across businesses, the magnitude of the impact will vary,” concludes Shankar.