Less than a week into 2023, Salesforce cut 8,000 employees from its workforce, many in San Francisco. Amazon sacked 8,000 workers of its own. Soon after, Meta, which owns Facebook and Instagram, would slash another 10,000 workers after laying off 11,000 a few months before.
The months that followed would remain unkind to technology workers, culminating in a typically quiet holiday season rocked by a compounding wave of major layoffs at companies including Spotify (1,500 jobs), Twilio (300 jobs) and Cruise (900 jobs).
A combination of pandemic-era overhiring and a challenging macroeconomic milieu—with high interest rates, venture capital pullbacks and a litany of pressuring shareholders—proved to be too much for tech companies large and small. A company's layoff announcement tended to feature some permutation of these factors, along with a CEO’s mea culpa.
In total, data from layoff tracker Layoffs.fyi shows more than 258,000 tech workers were laid off worldwide this year, a 56% increase from the nearly 165,000 laid off in 2022. More than 76,000, around 30% of the global total, were at companies headquartered in the San Francisco Bay Area.
“Companies are still trying to correct for their overhiring during the pandemic surge,” Layoffs.fyi founder Roger Lee told The Standard in an email. “They’re finding that they may not have cut enough in their last round, so they’re going back to the well for further cuts.”
Understandably, the carnage of 2023 is leading to concerns for further bloodletting in the year ahead, but experts consulted by The Standard largely have an optimistic outlook that most mass layoffs are over, particularly as hiring returns to normal levels. However, that doesn’t mean everyone will be immune from the readjustment.
Cautious Optimism
The course correction on pandemic-era hiring may continue through the early part of next year as companies continue to adjust their budgets into 2024 to improve their profitability outlook, according to Lee. These layoffs likely won’t be a mass culling as they were at the start of 2023, but they will continue to happen—as they did at the end of the year.
Art Zeile, the CEO of DHI Group, which operates tech career website Dice, said he believes these more recent layoff rounds are already giving way to a stabilization of employee headcounts. Companies that were reluctant to hire through 2023 are starting to be more bullish with posting new jobs, he said.
“We are seeing customer sentiment change. We're seeing a solidification of tech job postings right now,” Zeile said. “So we feel pretty good about 2024.”
A key reason for that optimism came Wednesday when the Federal Reserve announced it would hold interest rates steady for the third straight time—and would likely cut rates at least three times in 2024. Compared with the first half of 2023, where interest rates rose again and again, these indicators are tipping the scales for employers to ramp up hiring.
More than half of tech companies in San Francisco, according to Megan Slabinski, a district president for staffing and recruiting firm Robert Half, are looking to hire tech workers full-time.
Besides layoffs, employers are concerned about attrition, she said, especially due to lean staff that were likely overworked throughout 2023. To assuage this, she says, companies will likely expedite their hiring to keep top talent and sustain growth.
“We're hearing from hiring managers that you can only hold on to headcount for so long before it stymies growth or it creates unintended attrition,” Slabinski said.
Signs of Stabilization
Even as optimism grows among employers, that hasn’t necessarily translated to a short-term boost in tech job postings and morale in the sector among the rank-and-file remains low.
“If you ask anybody in San Francisco that just got laid off, they'd say, ‘Oh, I want to stay in San Francisco, but all the cool companies aren't hiring anymore.’” Zeile said.
Unlike the mass growth during tech’s pandemic-era boom, hiring—especially within Big Tech—will be a lot more measured to prevent another boom-bust cycle, Slabinski said.
But tech workers are still in high demand, Zeile and Slabinski say, especially for “less sexy” non-tech companies. (Tech unemployment, according to federal data, fell to a flat 2% in November.)
“Those companies now are offering more stability,” Zeile said. “You could be in a company that won't go through these layoffs that have been very, very visible.”
That’s not to mention the AI-sized elephant in the industry.
Specializing in artificial intelligence and machine learning will be a major advantage for technology workers. Jobs in the AI field are paying more, while the number of AI-related positions grew five to ten times compared with last year, Zeile noted.
At the same time, the possibility exists that the generative AI boom could take up existing work—especially in entry-level software engineering jobs. IBM CEO Arvind Krishna, earlier this year, warned that 30% of its jobs could be taken over by artificial intelligence in the next five years.
As seen in the broader tech industry during the pandemic, the AI boom could come back to bite workers yet again. Chicago-based job placement consultancy firm Challenger, Gray & Christmas listed artificial intelligence as a reason for job cuts for the first time earlier this year.
“While the rest of the tech industry pulls back, in areas like artificial intelligence, we're seeing a return to pandemic-era levels of rapid hiring and expansion,” Lee said. “Only time will tell how it will turn out this time around.”