After three months of sweeping layoffs, is the tech industry’s blaze of job cuts finally cooling?
Between January and March, largely U.S.-based tech companies managed to lay off more people than they did in the entirety of last year. There was a reprieve in April, as only around 6,330 employees were cut from the tech sector.
Search less. Close more.
Grow your revenue with all-in-one prospecting solutions powered by the leader in private-company data.
That’s a pretty dramatic 83% drop from March, and a low we haven’t seen since last December, when companies slashed around 4,000 workers.
Another count drops
It’s also worth noting only 34 companies announced layoffs this month, compared to 60 in March and 84 in February. Not only are fewer people leaving their tech jobs, fewer tech companies are actually making the move to cut employees.
That tracks, according to Healy Jones, an executive at the startup consulting firm Kruze Consulting. Fewer of his clients are laying off workers en masse in what was originally an effort to conserve cash and extend their runway. Some are simply opting to lay off one or two employees if they’re already not a good fit for the company.
“A handful of people are just not working out perfectly for them,” Jones said. “Let’s move on from them and extend the runway a little bit. So it’s almost like an excuse to lay people off.”
But I don’t think layoffs are tapering off any time soon. The Federal Reserve passed another interest rate hike on Wednesday, indicating both public and private markets will remain rather inactive for the foreseeable future. Most companies are still citing economic instability as the main reason for layoffs.
“If interest rates continue to increase, it’s going to make it very hard for companies to hire because they’re not going to be growing, they’re not going to be investing,” said Hakki Ozdenoren, an economist with workforce analytics company Revelio Labs.
Startups are not done with layoffs
And keep in mind our layoffs tracker has recorded only 651 companies that reported layoffs since we began tracking the numbers in 2022, which means there are still plenty of companies that raised money at high valuations in 2021 that have yet to act.
We may see another deluge of startups announce mass layoffs as they eat through their runway.
“We’ve already seen a lot of pain in the late-stage market, and those failures are going to be more spectacular because instead of it being a 15-person company, it’s going to be a 500-person company,” Jones said.
I’m keeping my eyes peeled for the seed- and early-stage companies. They’re small, and when they go under or announce layoffs those numbers aren’t as dramatic. But they haven’t raised as much money as the later-stage startups have, and I’m curious to see how they’re managing their runway.
We also wrote last week that the largest contributors to the deluge of tech layoffs — Amazon, Meta, Alphabet, Microsoft and Salesforce 1, which have together laid off 42% of all tech workers between 2022 and 2023 YTD — have walked back only 8% of pandemic-era hiring.
How long can these companies last with bloated employee numbers? We’ll know more next month. Stay tuned.
Illustration: Dom Guzman
Stay up to date with recent funding rounds, acquisitions, and more with the Crunchbase Daily.