Go no further than Mark Zuckerberg’s proclamation in February that 2023 would be the “year of efficiency” to understand the shift in tone that has occurred in Silicon Valley in recent months. It’s not exactly the kind of phrase that makes your heart race—unless you’re an employee who gets to hear it. In addition to the 11,000 employees it let go in November, Mr. Zuckerberg’s software giant Meta said on March 14 that it will let go 10,000 more employees.
Meta is not alone himself. After letting rid of 18,000 white-collar workers, another internet juggernaut, Amazon, said on March 20 that it would lay off an additional 9,000 corporate workers. According to data provider Crunchbase, American tech companies have disclosed 118,000 layoffs so far this year, on top of the 140,000 job cuts from the previous year. More could come after this. The chief operating officer of the commercial software company Salesforce intimated on March 24 that the company will soon add to the 8,000 layoffs it had previously announced.
Investors applaud the industry’s newly discovered cost sensitivity. From its most recent low point in late December, the tech-heavy NASDAQ index has increased by 16%. There is yet more to come. Just 6% of the American tech industry’s employees has been laid off since the year 2022. As tech companies kept on hiring into 2022, the overall employment in the sector has only now started to decline due to layoffs (see chart 1). In contrast, America’s overall tech employment decreased by 23%, or 685,000 jobs, between the dotcom boom’s high at the beginning of the 2000s and its nadir at the end of 2003.
But, the recent layoffs were significant and broad enough to raise two questions. Who is first to get fired? Second, where are the fired employees going?
According to Tim Herbert of the trade organisation Computing Technology Industry Association (CompTIA), techies have so far largely escaped harm. Instead, corporate operations like sales and hiring have mostly been cut. They had progressively increased as a percentage of employment in the IT sector in recent years, a telltale symptom of bloat (see chart 2). The tech industry added about 1 million jobs between the height of the pandemic in the spring of 2020 and the start of 2023, when employment peaked. A headhunter’s general rule of thumb states that one recruiter can hire 25 new employees per year, so simply hiring such numbers required hiring many recruiters. Several of those recruiters might no longer be needed.
However, experts are not immune. In April, Meta will restructure its technical departments as part of its layoffs. Talented tech workers being returned to the open market could benefit other industries undergoing digital reinvention. Unglamorous sectors like industrial goods have long struggled to attract talent in a way that rivals the tech sector. They are currently pounced. In order to create more intelligent farm equipment, American tractor manufacturer John Deere has started hiring tech professionals who were fired. The business established a location in Austin, a renowned tech hotspot in Texas, last year. Automakers are clamouring for tech talent as they concentrate more and more on software. Banks, health insurance companies, and shops are also.
A new wave of businesses is being fueled by some of the fired techies. A Silicon Valley startup school called Y Combinator received five times as many applications in January as the previous year. The “generative” artificial intelligence (AI) discipline, which uses sophisticated algorithms and a tonne of data to produce everything from essays to artworks, is currently generating a lot of excitement (indeed, this is one area where big tech continues to hire enthusiastically).
As with the smartphone before it, optimists anticipate that this technology will spur the development of a new generation of innovative applications. In the future, the new AIs might even lessen the need for human marketers, for example. Yet they might also, like other innovations before them, give rise to completely new job categories, not the least of which would be in the tech sector.
