The labor market is still strong overall, but some companies — especially in tech — are starting to make cuts. Here’s how to handle the next steps.
It’s happening at firms run by the Winklevoss twins and the world’s richest man, along with mom-and-pop companies: layoffs.
That dreaded word has been notably absent in the past two years as pandemic stimulus measures funneled cash into the economy and firms struggled to hire, leading to the tightest labor market in decades.
However, cracks are beginning to show. Surging inflation is eating into consumers’ discretionary income and rising interest rates are spooking the stock market. While the overall job market still looks strong, US firms added the fewest positions last month since the pandemic recovery began, and small companies were hit particularly hard, shedding 91,000 jobs, according to payroll data from ADP. Meanwhile, tech companies such as Twitter Inc. and Microsoft Corp. are slowing hiring or instituting freezes.
If you’re one of the unlucky ones — or if you’re worried layoffs are coming — experts say a crucial first step is to keep your spirits up.
“The number one thing to do after a layoff is to not take it personally,” said Maggie Mistal, a career consultant and executive coach based in New York and Florida. “If you take a hit to your self-esteem because of a layoff, recruiters and hiring managers will pick right up on it and see you as damaged goods.”
Figure Out Your Budget
When you’ve just lost your job, monetary matters suddenly become even more important. First, try to negotiate for severance pay, or for a larger amount.
“Immediately after a layoff, somebody is going to feel guilty about laying off an employee, so you really should try and ask for what you can get right at that moment,” said Susan Peppercorn, a career coach in Boston.
She also recommends applying for unemployment insurance, which can usually be done online through state websites.
“You’ve been paying taxes, and part of those taxes have gone into the unemployment system, so you’ve been paying insurance to help you out at a time like this,” she said.
After a layoff, it’s worth taking a close look at your day-to-day budget, said Noah Damsky, a financial planner at Marina Wealth Advisors. He suggests making cuts in areas like streaming services, gym memberships and dining out. And only take money out of your 401(k) as a very last resort, he said, since that’s “mortgaging your future to get by today.”
For health insurance, some people have the option of remaining on their former employer’s health plan for 18 to 36 months, although you may have to pay for coverage. You can also apply for Medicaid on a state-by-state basis, or join a partner or spouse’s insurance, Damsky said.
Take Your Time
There used to be a taboo against gaps on a resume. But now, with so many leaving their jobs in the Great Resignation or taking sabbaticals because of burnout, that’s no longer the case.
“I don’t think a gap matters,” Peppercorn said. “If a candidate says, ‘I really wanted to take some time to think about what I really wanted in my next step,’ I don’t think they get any pushback.”
LinkedIn now offers a feature called “career break” with 13 different options to explain gaps, including full-time parenting, career transition or bereavement.
Mistal encourages taking time to reflect on your career and life goals. Getting coffee with former colleagues or taking training courses to develop new skills can be ways to keep your momentum going.
Don’t Take Too Long
Still, staying out of the workforce for a prolonged period of time can make it harder to come back. Peter Cappelli, professor of management at the Wharton School at the University of Pennsylvania, cautions against taking too much of a break, unless you have personal circumstances that necessitate it.
“Employers resist hiring people without jobs, and the longer they have been without them, the more difficult it is to get hired,” he said.
Experts say you don’t need to take a lower-paying or less prestigious job right away just to get back into the workforce, but a part-time gig could help bridge the gap, said Erik Baskin, founder of Baskin Financial Planning.
That might be a job at a local coffee shop or retail store, or driving for a ride-share company or food delivery service. For those with special skills, there could be opportunities for consulting or freelancing.
Watch the Economy
Navigating a layoff is especially challenging given the sometimes contradictory signals that corporate America and the economy are sending. Executives at companies ranging from JPMorgan Chase & Co. to furniture retailer RH have warned the US may be on the cusp of a recession, yet the May jobs report looked more optimistic.
Peppercorn advises workers who recently lost their jobs to keep a close eye on the economy when making decisions about next steps, like a career change.
“If inflation continues and there are more job cuts, I think workers are not going to have the same amount of leverage as they’ve had over the last number of months,” she said.
It might depend on what industry you’re in. For instance, tech startups laid off 26,651 employees in April alone, according to tracker layoffs.fyi, so jobs in that area might be harder to get.
For those who still have their job, Peppercorn warns not to “get too comfortable” and to maintain an updated resume.
“You never know what’s going to happen,” she said. “The more that you’re up-to-date, the better able you will be to make an adjustment quickly.”