High-tech job market in crisis, isn't expected to rebound soon

"The high-tech industry is in crisis," states a special report on job seekers from the high-tech industry published on Sunday by Israel's employment service. The report is based on the surge in job seekers from the high-tech industry, which grew by 71.5% from April 2022 to February of this year, and it is estimated that it will continue to grow following the banking crisis in the U.S.

The year 2021 and the first half of 2022 were excellent for high-tech. The number of jobseekers in the industry dropped from 11,150 in October 2021 to 5,250 in April 2022. This reflected the boost the local high-tech world received during the pandemic, but also the end of the period of eligibility for unemployment benefits due to the pandemic, which ended in June 2021. However, as mentioned, from April 2022 to February 2023, there has been a dramatic increase of 71.5% in job seekers from the high-tech sector, amounting to over 9,000 people. The proportion of high-tech job seekers among all job seekers increased from 3.75% in April 2022 to 5.85% in February this year.

The employment service states that "the data presented here refers to February 2023 even before the outbreak of the Silicon Valley Bank (SVB) crisis, which according to estimates is expected to lead to a wave of layoffs in the high-tech industry, including in Israel. It seems that the trend of the consistent increase in the number of job seekers in this industry is expected to intensify, so it seems that high-tech is in crisis," or in other words - the situation is expected to get worse.

However, the employment service also presents reservations in the report. One of them is that the number of high-tech workers is constantly increasing, so it is natural that the number of job seekers will also increase. In addition, it noted that "during the coronavirus crisis, the high-tech industry increased recruitment to the point that it is possible that the increase in the number of job seekers registered in the last 10 months is more of a correction for that."

Another worsening aspect of the high-tech market is the rate of layoffs among all job seekers. This rate in the industry increased from 65% in April 2022 to 76% in February this year. An increase in the rate of those fired and a decrease in the rate of those resigning indicate a decrease in the number of employment opportunities. At the same time, it should be remembered that according to data from the CBS, the number of vacancies for software engineers decreased from 14,150 in January 2022 to 7,000 in January 2023. Two conclusions emerge from these data: First, a large part of those laid off in the high-tech market found employment in other jobs that were available in the field, otherwise the situation would have been worse. Secondly, as time goes by, there are fewer vacancies in high-tech and it is harder to find a job.

Another serious aspect is that 4,670 of the 9,000 high-tech job seekers (52%) come from the core areas of software development and data analysis. A year ago, companies were looking for workers in these fields and took almost anyone they could find. From April, there was a 133% increase in the number of job seekers among software developers and data analysts, which was almost double the general increase in the number of high-tech job seekers.

Unemployment in high-tech mainly affects the strong regions of the State of Israel. About 58% of the job seekers from the high-tech industry live in Tel Aviv and the Central District, while the residents of the region make up only 31% of the job seekers in other industries. For comparison, the residents of Haifa and the north make up about 37% of all job seekers in non-high-tech industries, but only 22% of the high-tech job seekers. 86% of the high-tech job seekers come from localities included in the intermediate clusters (4-7) and the high clusters (8-10). The residents of the low clusters (1-3) make up only 14% of the high-tech job seekers even though they make up about 39% of the non-high-tech job seekers.

An alarming statistic that emerges from the report is the proportion of women among the job seekers in the high-tech industry, which stands at 38%, even though their share among the workers is smaller and stands at less than a third. According to the composition of the high-tech workers, 82% of the high-tech job seekers are non-Orthodox Jews. Arabs make up only 5.5% of job seekers in the high-tech industry, but 27% among job seekers who are not in high-tech.

The big question now is to what extent the high-tech recession will spread to the rest of the economy. One effect that already exists is that the unemployment rate has passed 4%. Since 4% is still low unemployment, the situation is not very disturbing for the time being. It should be expected that during the summer the rate will reach 5%, if only because of the seasonal layoffs in the field of education. The question is, if the rate reaches 6%, will this be an indication that the crisis in high-tech has effected the entire economy?

The former VP of the employment service Nira Zimels, and currently the CEO of the "Be-atzmi" organization for the integration of vulnerable populations in the workforce, says that "the recession in the U.S. will have an effect mainly on high-tech, but I do not expect that unemployment will jump dramatically or that there will be waves of layoffs. Maybe unemployment will deepen a little, but I don't foresee a catastrophe." She explains that "most of the world of employment in Israel is in the field of local services, whether public services or medical, educational or retail services. I see in our aid programs that the integration rate of women and men from the Arab population in the workforce is high."

According to the Deputy Director of Planning & Research of the Employment Service, Dr. Ofir Pinto: "High-tech is the locomotive of the economy. When it rises, it pulls the economy and when it falls, there is a chance that there will be a decline in other branches, for example, those who provide services to high-tech." On the other hand, he believes that "we shouldn't panic. We don't see a decrease in vacancies."

Indeed, the number of vacant jobs in the economy maintains an extremely high level of 143,000 jobs. According to Pinto, the employment bureaus see a high willingness of people willing to move from high-tech to other branches. "It pulls those branches up as well."

There is also a positive figure in the Employment Service report: the number of income guarantee claimants fell to the lowest number in the last two decades - about 54,000. This is 16% lower than in April 2022, which was 63,500. This figure probably reflects the large number of available vacancies with low income. Pinto predicts that the number will continue to decrease "as long as the market is tight and there is no sharp decrease in the number of vacancies."