Coronavirus

Tech Sector Feeling COVID-19’s Economic Pain

by

Competition for tech jobs is up and workers could lose bargaining power.

Key Points:

  • Since mid-May, tech job postings have trended below overall job postings and for weeks have remained approximately 36% below last year’s trend. 
  • The damage is widespread, with tech postings doing worse than job postings overall in half of tech hubs and 89% of non-tech hubs as of July 24. 
  • Competition for tech jobs is rising, which may be due in part to tech’s work-from-home options.

The US continues to struggle to contain coronavirus and its economic fallout. The economy has improved recently, but the possibility of another round of lockdowns looms amid a resurgence of the virus in southern and western states. 

At the beginning of the crisis, tech job postings initially fared better than overall postings. That may be because lots of tech work doesn’t require much face-to-face interaction. What’s more, some tech companies already had remote work policies in place, making it easy to scale up work from home. 

Tech postings trend languishes

However, as the pandemic progresses, tech postings now are performing worse than the overall job market. Tech postings started to fall behind in mid-May and, since then, the gap has grown steadily. On July 24, the overall job postings trend was 21% below its 2019 level. But tech jobs were hit harder, settling at 36% below last year’s level for weeks and showing no signs of bouncing back.

Tech’s failure to recover is probably due to the high cost of hiring and firing. While a restaurant may take on workers based on demand experienced over the past two weeks, sectors like tech have much longer planning horizons. And with so much uncertainty, as highlighted in the Congressional Budget’s Office latest economic outlook, bringing on new employees may be a low priority now.

However, not all tech jobs have been hit equally hard. Through July 24, IT operations and help desk jobs were down 32% and system engineering jobs 31% from last year’s trend, better than tech jobs overall. Wide adoption of remote work probably explains why these types of tech jobs are doing better. 

Meanwhile, software development jobs are in sync with overall tech postings at 35% below the 2019 trend. But data scientist and IT management posting trends are down sharply, at 43% and 45% below a year ago respectively. Artificial intelligence and machine learning, a subgroup of software development, is 29% under the 2019 trend, showing that coronavirus has pummelled even what until recently was the poster child for cutting-edge tech jobs.

Economic damage widespread

Through July 24, the overall job postings trend in all of the eight tech hubs identified by Indeed, was down more than the 21% decline in overall postings nationally. In addition, in half the hubs, tech postings are recovering slower than overall postings. The gap is widest in Raleigh, NC, where the overall postings trend was down 26% from a year ago, while tech job postings were off 45%.

Outside tech hubs, the underperformance of tech job postings is even more pronounced. For example, in tech hubs, data science job postings were trending 37% below a year ago as of July 24, while in non-hubs, data science postings were off 51%. The plunge in postings for data scientists both in and out of tech hubs is quite a turnaround from last year, when candidates for this occupation were in hot demand. Employers may be viewing data science analysis as an investment that isn’t immediately critical for business.

This pattern of a greater decline in tech postings outside major tech hubs is evident not only in data science, but in all tech subcategories. This may be because more-established tech companies, which often are sited in tech hubs, are more likely to have the financial resources to ride out a crisis.

The poorer performance of non-tech hubs reverses the previous tendency, in which smaller tech centers had been gaining on the eight hubs. Amid great uncertainty about coronavirus, tech companies may be pushing for centralization in major hubs rather than dispersion. 

Tech job seekers have more competition 

As tech postings have declined, relative job seeker interest in the sector has risen. In February, tech job postings received 68% of the clicks of the average posting. By July 24, tech postings were attracting 95% of the clicks of the average job. More clicks per posting means that, relative to employment opportunities, more people are interested in these jobs than in the pre-COVID era. This greater competition could spell a loss of bargaining power for tech workers. If more people want these jobs, tech companies may scale back benefits like unlimited personal time off.  

Some of this rising interest is probably driven by tech’s quick and widespread adoption of work from home. Announcements about permanent remote options from tech giants like Facebook and Twitter undoubtedly grabbed job seekers’ attention.

On the days of these announcements, the share of searches per million for Twitter and Facebook skyrocketed. And while ‘online’ and ‘wfh’ (work from home) have been fast-growing search terms during coronavirus, some of the interest may also be because it is no longer necessary for new hires to live in the hyper-expensive San Francisco Bay Area. Case in point: rent in the Bay area is falling, probably because tech workers are leaving and the influx of new tech workers has shriveled.  

Conclusion

It looks to be a long road ahead for the tech sector. The economic damage caused by coronavirus has been vast. And, even though the overall job market has recovered a bit, the tech job postings trend has yet to bounce back. Within the broad tech sector, there are variations. IT help and system engineering jobs are faring relatively better, while data science and IT management are doing worse. Tech jobs outside the major tech hubs are especially hurting, and these areas could lose the ground they had gained on those tech centers before coronavirus. This mainly reflects the uncertainty generated by coronavirus, which is clouding business forecasts and making it tough to carry out long-term budgeting. 

With fewer tech job postings and increased job seeker interest,in the field, competition for sector jobs is heating up. Companies are back in the driver’s seat, which could reduce tech worker bargaining power. In addition, benefits like unlimited time off and well-stocked snack bars could go on the chopping block. At the same time though, substantial geographic diversification of the tech workforce could occur if the sector widely adopts permanent remote work. Unless that happens, jobs may continue to concentrate in the major tech hubs, tightening the hold of places like Silicon Valley on this strategic part of the economy. 

Methodology

Tech jobs were identified using a curated list of 564 tech-related job titles. Metros analyzed had a minimum population of 250,000. The six highlighted tech categories make up 93% of all tech jobs.

To measure job posting trends, we calculated the seven-day moving average of the number of US job postings on Indeed. We indexed each day’s seven-day moving average to the start of that year (Feb 1, 2020 = 100 for 2020 data, and so on) or another date if specified in the chart.

We report how the trend in job postings this year differs from last year’s trend in order to focus on recent changes in labor market conditions due to COVID-19. For example, if job postings for a country increased 30% from February 1, 2019, to May 22, 2019, but only 20% from February 1, 2020, to May 22, 2020, then the index would have risen from 100 to 130 in 2019 and 100 to 120 in 2020. The year-to-date job posting trend would therefore be down 7.7% on May 22 (120 is 7.7% below 130) in 2020 relative to 2019. 

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