Headline-grabbing layoffs and hiring slowdowns at Amazon, Meta, Microsoft and Alphabet formed an ominous narrative about the relative health of big tech last month.
After two years of robust jobs growth, the tech sector felt the impact of a post-pandemic slump as macroeconomic uncertainty spread, inflation spiked and a cooldown set in.
The numbers are striking. More than 85,000 workers in the tech sector lost their jobs in 2022, according to the latest Crunchbase tally. Using different methodology, Layoffs.fyi has tracked just over 143,000 tech sector layoffs by nearly 900 companies to date this year.
At the same time, the employment picture for technologists has remained bright, even in the tech sector. CompTIA’s analysis of U.S. Bureau of Labor Statistics data shows tech companies added 14,000 workers in November, marking two full years of job growth.
“Admittedly, it is difficult to explain the dissonance between the ‘vibe’ in the economy and the jobs data,” Tim Herbert, chief research officer at CompTIA, told CIO Dive via email. “It is very much a function of mentally balancing what could be characterized as company data points — whether a layoff or hiring — versus the net effects of all those data points across the labor market.”
Under pressure to demonstrate fiscal responsibility, companies are trying to do more with less.
That dynamic is particularly acute in the tech sector, where “a lot of companies overinvested in the last several years to drive growth,” according to Neil Jain, partner, high-tech and software, at the consulting firm West Monroe.
More than half of tech sector organizations have conducted layoffs or are considering workforce reductions in the next six months, according to a November West Monroe survey of more than 500 C-suite leaders. Nearly one-fifth of respondents work at tech companies.
Some tech companies have a workforce cushion to soften the blow of staffing cuts, according to Jain. “A lot of these companies built a really strong bench of talent over the last couple of years,” he said.
In other cases, hiring freezes and layoffs may simply be a return to normal staffing levels.
“Talent wars and shortages, plus the V-shaped recovery in 2020, meant that many tech companies were planning for an extended period of economic expansion,” J.P. Gownder, VP and principal analyst at Forrester, said in an email. “In many cases, these companies are returning to the employment levels they had at the beginning of 2020.”
The tech sector accounts for only a fraction of the overall technology workforce and demand for talent remains strong, as reflected in a persistently low unemployment rate, which dropped to 2% last month.
“If I were a CIO at a retail or industrial company, I would see this as a good time to pick up some talent who have experience building and doing technology at really cool companies in the technology space,” Jain said.
But even in a tight labor market, job losses take their toll. Nearly two-thirds of respondents to the West Monroe survey said the hit to employee morale was the biggest challenge when considering layoffs.
“We should not forget the human costs associated with layoffs,” Gownder said. “Lives and careers are upended. For those employees not laid off, there is survivor guilt, which lowers morale and contributes to burnout and attrition."
