2023 IT Jobs Market Update – Has the US Tech Job Layoff Contagion Reached Our Shores?

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2023 is in full swing and the runaway IT jobs market is finally easing back. Though with unemployment at 3.5%, it’s still busy out there.

In this edition of The Download, I will try to make sense of the various market indicators to forecast how the market will behave over the coming months.

Mass Layoffs?

We have all seen the news regarding the mass tech layoffs in the US including Amazon, Salesforce, Twitter, Meta, Alphabet, Microsoft etc. This trend has gained enough traction that there’s even a website to track tech layoffs around the world, including in Australia. It details the job losses by company and location, and even lists of names of those affected. layoffs.fyi, it certainly makes fascinating reading.

It is important to be clear that this trend is not impacting Australia to anywhere near the level of other markets. Yes, we have spoken to some candidates who’ve been let go, but not many, a handful or 2. The local market is seeing general business failures that happen in all markets (Volt, Metigy, Deliveroo) and a series of small-scale redundancies. That’s the extent of it.

At this point, I’m not sensing any sort of imminent tech jobs catastrophe. The C-level execs I speak to have fairly run of the mill concerns: delivering more in an inflationary market with unchanged budgets, and delivering efficiency and innovation ahead of their competitors. I haven’t heard about anyone planning to slash teams, though these types of plans are often accompanied by the word ‘Surprise!!!’.

On the upside, we are still seeing stories of businesses starting to expand locally. And there are plenty of start ups still being funded, though the era of silly money seems to have passed. Interestingly, Atlassian has trimmed its vacancies from 1000 in November to 600, whilst Canva still have over 250 openings.

And whilst I’m writing this, I’m hearing the gnashing of teeth of one of my colleagues as she’s learned that two-thirds of her shortlist has disappeared to other roles. This is still very normal in the Balance office… there’s lots of action left in this market!

Skilled Immigrants

Hurrah!! We’re finally seeing some skilled immigrants arriving over the last few weeks. The government claims to have reduced the visa backlog from almost 1 million to 600k. They have allegedly granted 4 million visas since coming to office in May, though most of these are visitor visas.  Of the 64,000 skilled immigrant visas processed, it appears the government prioritised processing applications from Teachers and Health Care workers, with their visas processed in as little as 3 days. Whilst backpacker visas were processed in one day.

Students visa holders used to account for over 60% of Australian universities tech students. Thus they are integral to the future viability of our knowledge economy.  By mid-last year, there were 250,000 fewer international students (Page 64) in Australia than pre-pandemic. The government has now approved 370,000 student visas since it came to power, and the demand for students visas is up 40% from 2019. So it looks like a student boom!!! The theory that our extended lockdowns would discourage future immigration seems to have been well and truly disproven.

Amongst all this positive news is a fly in the ointment. The skilled immigrants that the team at Balance are seeing are not what the Australian market needs. Last week we were inundated with over 100 manual Testers who had recently landed on our shores. Manual testing is a somewhat outdated skillset for which we rarely see demand. We are still crying out for Front End, Back End and Full Stack developers, as well as Cyber, Cloud and Network engineers yet we’re not seeing virtually any arrive in the country. I suspect this may resolve relatively quickly with our talent competitors in the US, UK and NZ markets all struggling and IT workers applications finally reaching the top of the visa processing pile.

Ad Numbers

Job ads numbers are down but it appears to be a fairly orderly easing of demand. Long time readers would know I’ve been collecting Seek job ad data for many years. If we look at the 6 weeks to mid-December 2022, Seek ads declined 22%, with a 19% drop in IT ads. Big numbers!! However small fry compared to the first 6 weeks of the pandemic slowdown where 70% of job ads and 62% of IT job ads disappeared. And importantly, there are still 33% more jobs ads that pre-pandemic.  Interestingly, there seems to be a de-coupling of the general jobs market and the IT jobs market, with the former recording a small increase from mid-December to now, whilst the IT ad number declined another 9%. Seek told me today that the IT and Hospitality sectors have seen the greatest decrease in job ads over the December quarter.

Before we get too Henny Penny, I suspect that there are a number of reasons for the drop. With the skills crisis easing, more jobs are being filled at the first attempt, negating the need to readvertise or advertise at all. Further, in our experience Seek’s efficacy for tech recruitment has been fairly poor for some time and advertisers appear to have been slowly heading for the exits.

Recruitment peak body, RCSA, compiles a national job index which covers 6000 data sources (employer and recruiter job sites). They have seen a national decrease of 4.7% last quarter, and pleasingly this still represents a higher level of activity than 12 months previous. Interestingly, their NZ index saw job ads plummet 22.4% in 3 months to be 26.7% lower than last year.

I would suspect that the influx of backpackers and students will see job ad numbers continue to decline as they rapidly fill the unskilled and semi-skilled talent void. I think everyone would agree this is great for our economy, wholly staffed businesses are fully productive and the economy is spurred along by big increases in the sales of cask wine and instant coffee to our backpackers and students 😊.

My Predictions 

With inflationary pressures affecting both business and consumers, I expect to see a tightening of IT budgets over the coming year and significant restraint on increases in head count. Whilst businesses still need to deliver, they will be increasingly funding roles from CAPEX rather than OPEX, and therefore I see a strong swing from permanent to contracting.

With interest rates rising and household budgets strained, we will see one cohort of workers chasing every dollar by moving from permanent employment to contracting, whilst another cohort will chase job security in increasingly uncertain times and move the other way 😊.

In the last 10 minutes my colleague had a candidate ask for a 32% increase in pay to move roles. I strongly suspect we will see a widening gap between candidates and employers’ expectations. This will be interesting to watch play out.

I suspect we will say goodbye to much of the silly money and sign-on bonuses by mid-year. Project Managers, Business Analysts and IT Support will be in increasingly abundant supply and I believe we may see some easing in their rates. However, Developers, Cyber, Cloud and Network Engineers will still be rare as hens teeth and there will be little to no change in rates. But in some positive news, this year they won’t have 9 offers, they’ll have 2, and you will be able to run a sensible recruitment process, not just the fastest one possible.

It will certainly be an interesting year….