Tech layoffs are accelerating, data shows. The surge in job cuts comes after reductions in human capital slowed so much in the second half of 2023 that it seemed “tech layoffs are almost a thing of the past.” At the time, reported layoffs had been trending downward for months and months until reaching what appeared to be a volume so low as to be inconsequential.
Things have changed. At the time, there were concerns that rising technology valuations were taking some pressure off technology concerns and that large-scale cuts appeared to be losing their luster compared to more targeted reductions in overall staffing. Then 2024 arrived and flipped the script.
The recent wave of layoffs have hit technology companies, big and small. Veho, a package delivery company, laid off 65 people this week, or about a fifth of its total workforce. After rapid revenue growth in 2023, midsize tech companies are also cutting back. The latest Brex layoffs make it clear that even some of the best-known and best-funded tech startups are finding their workforce overstretched. And big companies are cutting back, too: Microsoft recently laid off 1.900 workers and Google plans more cuts throughout the year. In the latter case, rolling layoffs are a great way to tell workers to quit, so the total attrition at the search giant can be expected to outweigh the forced departures.
The plural of anecdotes is not data, so we must look at historical trends to put these layoffs in context. Fortunately, that information is at our fingertips and we can report that, yes, the surge in layoffs you are feeling is, in fact, a real wave. Let's look at how quickly tech companies are pushing humans out of their businesses and our working hypotheses about why cuts are happening so frequently and so deeply.
Looking at the data
The layoffs in the technology sector They hit bottom in September 2023. In that month, Layoffs.FYI counted just 4.707 tech layoffs out of a total of 65 known cuts. Those numbers increased throughout the final months of the year, reaching just over 8.000 in November and 7.000 in December, from 72 and 56 known cuts, respectively.
Then 2024 began. So far, there have been 23.670 known tech layoffs in January, coming from 85 known reductions. Not only are we seeing more companies cutting back so far in January, but the reductions are also larger in scale. More and bigger cuts mean one thing: Tech sector layoffs are accelerating once again… and quickly.
What is happening?
The current wave of layoffs is not due to a single factor.
The shift to AI is one hypothesis for why even hugely profitable tech giants are laying off staff. In that scenario, they would simply be redirecting resources in the direction they believe in most. More AI, less creator management, etc. And that means staff in less favored areas of the business could find themselves left out.
That technology as a whole is more bullish on AI than almost anything else is a story we've already seen in venture capital, so we can easily believe it. But when it comes to layoffs, it seems the stakes are higher, and some of these other factors are more concerning.
For all the talk about slowing inflation and what policies should follow, not much has changed on the macroeconomic front in recent months. The days of ZIRP (Zero Interest-Rate Policy) are behind us, that's for sure, but even the moderate rate cuts that many hope to see soon are taking their time. If tech companies follow the lead of central banks, high and tight rates are another incentive to curb their enthusiasm and spending by 2024.
There is also the issue of swelling, with all due respect because we are talking about people. But having witnessed the year 2021, we also know that technology companies hired liberally during that period, without always having a clear idea of how they would use that talent. When winter comes, it's no surprise they realize they can do more with less. That cuts are continuing at the current level is a surprise, but some trends last longer than expected.
Arguably, they may also understand that they don't want to do more. There is always the risk that technology companies do too much and not do it well. With intense competition looming on the AI front, perhaps tech giants and startups are starting to realize that they need to get it right; the sooner the better.
Other hypotheses occupy our thoughts. One of them is the evolution of major technology companies toward MBA-led workshops that prioritize short-term financial results over long-term innovation. This is what the layoffs at Google's skunkworks division, for example, sound to our ears.
For tech workers, the picture is clear: no matter what company you are at, no matter what industry you go into, your job is not secure. Keep that resume up to date, so you don't find yourself unprepared and unemployed at the same time.
