Report: Dot-Com Layoffs May Have Peaked

The number of dot-com job losses fell for the second month in a row, dropping 18 percent in March, according to a report released Tuesday by the job placement firm of Challenger, Gray & Christmas (CGC).

From July through January, tech job cuts rose steadily, peaking at 12,828, CGC said. In March, however, 9,533 Internet jobs disappeared, following February job cuts totaling 11,649.

Of course, the dot-com job market has still seen better days. In March 2000, only 25 dot-com employees lost their jobs, according to CGC.

CGC chief executive officer John Challenger told the E-Commerce Times that employment in the dot-com sector will “most likely continue to deteriorate.”

Although Challenger said that the number of job cuts may continue to decline in coming months, that will be “because of a decrease in the total (dot-com worker) population,” and not because the dot-com sector is recovering.

A total of 75,525 dot-com jobs have been slashed during the past 16 months, CGC said, with 34,010 of those coming in the first quarter of 2001.

Dot-Com Shutdowns

According to CGC, even though the number of dot-com job cuts has fallen, 22 percent of firms that laid off employees in March — 23 out of 105 — shut down entirely, compared to 14 percent in January.

Particularly at risk from the shakeout, according to Challenger, are companies that are not yet profitable and are continually turning to capital investors for cash infusions. Also at risk are companies that are highly dependent on advertising revenue, particularly from other dot-coms.

IDC analyst Jonathan Gaw told the E-Commerce Times that even though it seems as if a high percentage of dot-coms are going under, the phenomenon is not limited to the dot-com sector.

“That’s what happens in the normal course of business,” Gaw said, pointing out that overall, nine out of 10 new companies eventually fold.

Where Have All the Jobs Gone?

According to CGC, 66 percent of the job cuts came from companies that provide the backbone of the Internet. Challenger said this is further evidence that the Internet economy may not be on the road to recovery.

Internet technology firms announced 4,516 job cuts in March, up from 2,721 in February. Additionally, the dot-com professional services category lost 1,637 jobs in March.

Challenger said that the large number of cuts in Internet technology jobs is analogous to the “muscles supporting the skeleton of e-commerce being under pressure.”

However, Gaw said these layoffs “reflect the slowdown of the larger economy, not just the Internet economy.”

Long Time Passing

Notably, the number of e-tail job cuts dropped to 1,384, down from 2,874 in February.

Challenger said that the coming months will continue to bring a shakeout to e-tailing, leaving a handful of pure plays, but otherwise “virtually all brick-and-click retailers, at least in the short term.” However, Challenger added that “we’ll see a turnaround when we reach a point where the companies left standing are profitable.”

Forrester analyst Christopher Kelley agreed that e-tailing will survive in some shape or form, because consumers are “incredibly satisfied” with e-commerce and will continue to buy online.

Kelley told the E-Commerce Times that in the future, we will see “a different e-commerce than we’ve known,” as the Internet moves away from being the playground of pure plays to one channel in a multichannel retailing strategy.

Put On a Happy Face

Gaw pointed out that even though tech companies have been announcing thousands of job cuts, the numbers might not be as bad as they appear at first glance.

“There are a lot of layoff numbers, but some are cosmetic and are being taken care of through attrition,” Gaw said.

Many employees laid off by Internet firms are also quickly finding jobs with other companies, particularly by brick-and-mortar firms looking to ramp up their Internet presence, Gaw said.

“It’s easier to count layoffs than hires,” the analyst said. He pointed out that overall unemployment in the U.S. is still low.