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Marchon Partners Blog The Impact of Tech Layoffs – What do the numbers really mean?

14 Feb 2023

Thousands of technology employees have experienced layoffs which has impacted the current labor market. Employers at these companies are facing the challenge of navigating through this transitional period to keep their staffing levels strong and discourage voluntary turnover. Having a plan to prepare employers for effectively managing their headcount and protecting their top talent will usually ensure success.


What is the current state of the job market?


According to Crunchbase, as of the first week of February 2023, over 66,000 workers in the U.S. tech sector were laid off. These jobs along with the 140,000 employees who were also downsized in 2022, has resulted in over 200,000 jobs lost for the tech industry. Some of the companies who have announced their staffing reductions include:


Meta – 11,000 employees (November 9, 2022)

Amazon – 18,000 employees (January 4, 2023)

Microsoft – 10,000 employees (January 18, 2023)

Google (Alphabet) – 12,000 employees (January 20, 2023)


When CEOs explained to their employees the necessity for these reductions, the decision was mainly based on changes in the economy. According to Roger Lee, who founded Layoffs.FYI and started tracking layoffs in 2020, noted that as interest rates rose, layoffs soon followed. This was due to companies needing to adjust for increased borrowing costs.  Additional factors that influenced the decision of laying off workers included:


COVID-19 – Many companies cited a shift in the economy since the pandemic started when e-commerce and consumer spending was higher. Increasing their workforce was needed at that time in order to meet the demand. One example was Amazon who announced they hired 175,000 employees in 2020. As the pandemic ended, and spending patterns changed, the additional need for employees also decreased.


Economic Conditions – Many CEOs often explain declining revenue and stock prices prompted the need to reduce the headcount, cutting overall costs where savings could instead be invested in future growth. As it became necessary to pivot to a new economic reality, many CEOs noted new layoffs were also related to over-hiring.


Artificial Intelligence (AI) – An emphasis on automation including the development of AI tools that can help to streamline processes and increase efficiency are shaping many technology firms. As these tools often reduce employee costs, and as AI technology is becoming more sophisticated, many companies find it’s a viable alternative for future development and growth.


Different type of positions being affected


Most positions that have been downsized in the tech sector generally include jobs that are directly related to overhead and are not generating revenue. The most common positions are IT specific, part of recruiting, or marketing. Also, human resources and sales departments tend to see the largest reductions according to Lee.


Ways to navigate the layoff process


When large layoffs occur employers need to ensure their process is manageable for the best results as thousands of positions are eliminated at the same time. Most tech employers generally use the following communication model when sharing difficult news of downsizing:

Leadership: Announcements of mass layoffs are often addressed directly by the CEO who will outline the specific reasons for their decision. They typically express accountability of the decision making process and the current economic conditions that directly impact the company.

Empathetic: Since thousands of employees are transitioning out of the company, the CEO will recognize how this will be a difficult period for the entire company. They usually take an empathetic tone acknowledging the sadness of saying goodbye to their co-workers. They also often will recognize the contributions of those who are leaving and offer support to the remaining employees during the separation process.

Specific: Employers will typically announce additional emails or management meetings are forthcoming for those who are separated and the resources available to them. Sometimes CEOs will also mention the basic severance being offered and the best contact for additional questions to promote transparency.


How layoffs can impact employers in the future


According to the Bureau of Labor Statistics, 517,000 jobs were gained in January that resulted in a 3.4% unemployment rate. Industries that saw job growth included leisure and hospitality, business and professional services, and health care. 

While technology saw decreases at technology firms, other businesses who need tech workers  including those who code, or have cyber security and data scientist experience are competing for that talent. According to an Inc. article from January, laid off tech workers are often seeing increases as they move away from technology firms and join smaller companies. Revelio Labs, which is a workforce data provider, also found 72% of tech workers found jobs within 3 months of their layoff and half of those workers received increased salaries.