Amazon Will Lay Off More Than 18,000 Workers -- but That Doesn't Mean the Economy Is Doomed

Tech layoffs don't automatically spell trouble for the broad labor force.

The fact that Amazon is laying off workers shouldn't come as a big shock. The tech giant announced late last year that it was planning to reduce its headcount, and that layoffs would continue into early 2023.

But now, Amazon has announced that it will be cutting ties with more than 18,000 employees. And that's a pretty unsettling thing to hear.

But while it's never fun to learn that a major employer is downsizing its staff, the reality is that Amazon's latest move is not necessarily a sign that the U.S. economy is tanking and that widespread layoffs will soon be upon us. There's a reason Amazon and companies like it are having to let people go. And it's a factor that may not affect you at all if you work outside the tech industry.

Tech companies are being forced to scale back

Tech companies like Amazon enjoyed a nice boom during the early days of the COVID-19 pandemic, when people's lives went digital and remote. But over the past 12 months, as things have shifted back toward the "normal" most people enjoyed before the pandemic, tech companies have seen their revenue decline -- and have been forced to make cuts accordingly.

In fact, a lot of tech companies specifically ramped up hiring during the early days of the pandemic. But now that the need for extra workers no longer exists, they're cutting costs -- and ties -- to preserve their bottom line.

Clearly, this is not great news for people who work in the tech sector. But it's also important to recognize that the trend of announcing mass layoffs has, for the most part, been limited to the tech sector. And so people who work outside that sector may not need to lose sleep over the idea of being laid off just yet.

Even those who do work for tech companies aren't necessarily doomed. While Amazon's announcement sounds extreme, as of the end of 2021, Amazon had more than 1.6 million employees, 1.1 million of whom were based in the U.S. So all told, it's shedding a really small percentage of its total workforce.

Prepare for a layoff just in case

If you work for a tech company that boomed during the pandemic but has since declined, you may want to take extra precautions and gear up for a layoff just in case. In fact, preparing for a layoff is something everyone should do, regardless of industry.

The reality is that experts have been sounding recession warnings since mid-2022. And while we're not guaranteed to experience one in the near term, it's a possibility to acknowledge.

The best way to prepare for the loss of a job is to build a solid emergency fund. Aim for a minimum of three months' worth of living expenses in your savings account, and go beyond that point if possible.

Even though Amazon's recent announcement doesn't signify broad economic trouble, the loss of a job could happen at any time. Having a solid level of savings could make it so you're able to get through a period of unemployment without negative long-term repercussions.