Report: Dot-Com Layoffs Slowing Down

After setting a record in April, the number of dot-com job cuts fell by 24 percent in May, according to a report released Tuesday by Chicago, Illinois-based outplacement firm Challenger, Gray & Christmas (CGC).

John A. Challenger, chief executive officer of CGC, told the E-Commerce Times that the slowing layoff rates could be a sign that dot-com firms are reaching a point of equilibrium, where they have the right number of employees for their business models.

In April, a record 17,554 employees got pink slips from their dot-com employers. However, in May, that number dropped to 13,419.

Even so, over the past five months, 64,983 dot-com job cuts have been reported, which is 58 percent more than all of the dot-com layoffs in 2000.

Despite the drop from last month, May’s job cuts were still more than five times as many as the 2,660 job cuts reported in the year-earlier month, near the start of the dot-com shakeout.

“It was May 2000 when we saw dot-com job cuts really begin to escalate,” Challenger said. “Prior to that, cuts averaged a couple hundred a month.”

Cut Here

E-tail job cuts were down dramatically in May, falling from 2,284 to 310.

According to Challenger, the decline in e-tail layoffs could be attributed to the fact that many of the weaker e-tailers have already been ejected from the e-commerce game.

Challenger told the E-Commerce Times that it was inevitable that e-tail layoffs would start to slow down once the field was cut back to “companies that have models that will allow them to be profitable.”

Tech Sees Pink

Technology firms that provide infrastructure support to other dot-coms led the pink slip parade with 5,860 announced job cuts, CGC said. May was the third consecutive month in which infrastructure firms posted the highest number of layoffs.

Other sectors seeing high numbers of job cuts include customer service firms (3,462), professional services firms (2,265) and Internet portals (955).

“Despite the slump we are seeing among dot-coms and technology firms in general, it would be a mistake to discount or underestimate the impact these areas have had and will continue to have on the economy as well as our society,” Challenger said.

The Right Moves

According to Challenger, the silver lining in the the dot-com shakeout is that experienced people from the San Francisco, California and Seattle, Washington areas are now likely to move to other areas of the United States that are “starving for high-tech workers.”

Said Challenger: “Displaced tech workers in ultra-costly Silicon Valley cannot afford to wait around for the next technology surge, living unemployment check to unemployment check.”

The Information Technology Association of America reported in April that there are still about 425,000 unfilled information technology jobs in the U.S.

“So many have gone to the well to get their experience in the West,” Challenger said. “Now we need to see them fan out and spread that knowledge where they are needed.”

Closing Time

Although the number of dot-com job cuts was down in May, the number of dot-coms that shut down grew from 13 companies in April to 29 in May.

The number of dot-com closures in May was also only two fewer than the high of 31 closures in November 2000.

2 Comments

  • First of all, why is Challenger telling me that there are X number of layoffs in May, before May has ended?

    Since he has essentially become the Internet’s official layoff statkeeper, I wonder if he is getting the scrutiny he deserves?

    Second of all, I think 30-day intervals are too small to draw the broad kinds of conclusions that Challenger gives us in this article.

    Challenger says that at the end of May: “the decline in e-tail layoffs could be attributed to the fact that many of the weaker e-tailers have already been ejected from the e-commerce game.” Yet in April, just one month before, we had a layoff record.

    Perhaps it’s time to focus on longer intervals of time than 30 days, and get a moving picture instead of a snapshot.

  • Last time I checked there are still two days left in May. But these guys can tell us exactly how many jobs were lost this month?

    Would this story have been any less valid if it had come out next week?

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