U.S. tech industry layoffs have accelerated over the last couple of months, but the industry is still in a strong position to weather a recession.
During the first week of November, at least 6,473 tech workers in the U.S. were laid off, by our tally — a more than 600% increase from the 910 who lost their jobs the week before. Last week, there were more than 7,000 reported U.S. tech sector layoffs.
The job market whiplash comes after 2021’s economy brought about rivers of venture funding, a fertile stock market, and rocketing valuations that made the largest companies collect tech talent left and right to stockpile skilled workers. In 2022, markets became frosty, and some companies admitted they hired too many people, too fast.
This, some say, is a correction to last year’s hiring spree. While tech workers are going to have to adjust to a new reality — one that comes with lower salaries and fewer benefits — the tech industry is still poised to be one of the better-off workforces with the U.S. economy in flux.
Still a need for tech workers
Companies cut back on advertising spend in preparation for the economic situation to worsen. Meta, which is beholden to ad spend, saw dramatic cuts to its revenue and recently laid off 10,000 employees. Twitter has suffered from the ads cutback as well, not entirely due to Elon Musk’s takeover, and plans to cut about half of its employees from its payroll. Alphabet said during earnings that Google, which is the largest digital advertising platform, generated less revenue. The company could also push out as many as 10,000 “underperforming” employees next year.
But tech companies not beholden to ad spend are largely doing OK. This is always the case when the economy goes through a dramatic shift: some industries thrive while others go bottom-up. During the pandemic, the travel industry buckled amid social distancing guidelines while telehealth and e-commerce blossomed.
In fact, the overall tech market is facing a shortage of tech workers, the same shortage that drove large companies to stockpile top-tier talent in 2021.
According to tech insights firm Dice, job postings between June 2021 and 2022 (the most recent data available) increased by 60% as big players like Amazon and Apple continued to hire talent. Companies that are not considered “tech companies,” but use technology, such as Disney, Deloitte and Bank of America, joined the fray, becoming among the top 50 employers for tech roles.
June ended with 554,573 open tech jobs. For comparison, that would mean for every person who has been laid off so far in 2022, there are around eight available postings — more if people who were laid off earlier in the year have already found new employment.
Roles including cybersecurity, cloud operations, and data science and analytics continue to be in demand as companies operate remote or hybrid workplaces and require distributed and secure networks, per Dice. Cloud computing roles grew 162% between the first half of 2021 and the first half of 2022, while data-related roles that use languages like R, Go and Typescript increased by 111%, 131% and 142%, respectively.
Salary decreases on the horizon
Wages skyrocketed in the last couple of years amid the labor shortage. In 2019 and 2020, the average tech salary saw a 3.6% increase. And in 2020 and 2021, it spiked again by nearly 7%. Companies had to offer competitive salaries and benefits packages to keep and retain valuable employees who could otherwise be poached.
That number is likely to come down, according to Healy Jones, an executive at the startup consulting firm Kruze Consulting. Companies can no longer afford to hire new talent at a premium, and job seekers might find their new company pays less than their old one.
“The ones that are doing well are continuing to hire,” Jones said. “There are definitely job opportunities available in the startup world, but I don’t think they pay as much.”
That means tech workers who jump from one company to another are unlikely to see the kinds of salaries and bonuses they saw in previous years.
Big layoffs stem from worst-case scenario
Per the Crunchbase Layoffs Tracker, some companies have made incremental layoffs over the course of the year as the economic picture became clear. For example, food delivery platform Gopuff laid off 2,200 people in a series of three rounds this year. Meanwhile, Stripe slashed around 1,000 of its staff in November after laying off around 50 people in October.
Incremental cuts usually save money for a while, but they’re generally bad for employee morale. Continued cuts destabilize the company, hamper productivity and can make it hard for companies to retain top talent.
“Multiple rounds of layoffs, I think, it’s absolutely detrimental to a culture,” said Nolan Church, CEO of consulting firm Continuum. “Having gone through a layoff, it is the worst day for everybody involved. To then have it happen again, in my opinion, is a gigantic management failure.”
The general advice is to conduct one large, sweeping round of layoffs that’s based on a company’s worst-case economic scenario, even if it’s unlikely to happen. That means the volume of layoffs likely doesn’t paint a very accurate picture of how well or poorly tech is doing.
It also means those companies probably won’t do another round of layoffs any time soon.
“Cut once, cut deep and tuck in your top performers with either salary increases or equity increases,” Church said.
Illustration: Dom Guzman
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