February 28, 2024

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The US economy is booming, so why are so many tech workers being laid off?

SAN FRANCISCO — The first time Julian Chavez was laid off from his job as a digital ad sales representative at web.com didn't keep him out of the tech industry. That didn't happen the second time around when he was laid off from ZipRecruiter either. But by the third time, Chavez had had enough.

“I really liked what I did,” Phoenix resident Chavez said in a text message. “But the layoffs left me exhausted.” He is now pursuing a graduate degree in psychology.

Chavez is one of hundreds of thousands of tech workers who have been laid off in the past two years in what now seems like a never-ending wave of cuts that has upended the culture of Silicon Valley and the expectations of those who work at some companies. One of the richest and most powerful American companies.

Last year, tech companies laid off more than 260,000 workers, according to a layoff tracker Layoffs. For your information, cuts that executives mostly blamed on “overhiring” during the pandemic and high interest rates making it difficult to invest in new business ventures. But as these layoffs continue into 2024 despite stabilizing interest rates and a booming job market in other industries, the tech workforce is feeling desperate and overwhelmed.

The US economy added 353,000 jobs in January, a huge boost that was about double what economists had expected. However, Google, Amazon, Microsoft, Discord, Salesforce, and eBay all made significant cuts in January, and the layoffs don't appear to be abating. PayPal said Tuesday in a letter to workers that it would lay off another 2,500 employees, or about 9 percent of its workforce.

The continued cuts come at a time when companies are under pressure from investors to improve their bottom lines. The sell-off in technology stocks on Wall Street in 2022 has companies winning back investors By focusing on increasing profits, it laid off some tens of thousands of workers who were hired to confront the pandemic surge in consumer technology spending. With many tech companies laying off workers, laying off employees no longer indicates weakness. Now, executives are looking for more places where they can extract more work from fewer people.

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“We're going to continue to be careful about what we invest in, and we're going to continue to invest in new things, new areas, things that resonate with customers. And where we can,” Amazon CFO Brian Olsavsky said in response to a reporter's question during a media earnings call on Thursday. Finding efficiencies and doing more with less, we will do that too.”

“This is the way the American capitalist system works,” said Mark Zandi, chief economist at Moody's Analytics. “It is unforgiving when it comes to the pursuit of profitability and wealth creation. It redirects resources very quickly from one place to another.

Economic and inflation concerns in 2022 and 2023 will also impact the amount of software and cloud services companies buy, said Gil Loria, a technology analyst at DA Davidson Co.

“This has been reflected in the entire software ecosystem, and looking ahead to 2024, the latest data points seem to indicate that things are no longer getting worse but not yet better,” Loria said. “Their clients have not relaxed their financial constraints.”

Unable to return to the impressive revenue growth of years past, tech executives have instead chosen to put a spin on things on Wall Street by steadily cutting back on highly paid employees instead.

It seems to work. In 2022, the Nasdaq Composite, the stock index dominated by technology companies, lost a full third of its value. In 2023, it grew by 43 percent. It rose another 3 percent in January.

The shine has gone out of the tech industry

As stocks rose, morale in the San Francisco Bay Area — the heart of the U.S. tech industry — declined even further. The power that tech workers felt they had to change jobs and win higher salaries and bigger stock awards has partly evaporated.

For many tech workers, glamor has come from the industry they gave their lives to in exchange for steady jobs, flashy perks, and the chance for lucrative stock options. Google and Meta in recent years have cut back on employee perks such as free laundry, free massages, and food and fitness deals. “Technology seems to have changed forever since the mass layoffs,” an anonymous worker posted on workplace gossip app Blind this week.

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“It's very new to feel job insecure,” says Julia Grommell, a former senior product designer at a software company in the Bay Area. Since being laid off in February 2023, Gromel says she has received rejections from automated systems, been ignored by employers after several rounds of interviews, and received rejections with no feedback. She faces competition from large numbers of laid-off workers like herself.

Grommell said she has gotten interest from some companies that have already cut staff, but she is wary of them. “I'm not really interested in joining an organization that has proven it doesn't value the people who keep the business running.”

Like Chavez, she says she has begun to consider looking for other types of work, focusing less on wages and more on jobs that might provide a better work-life balance and more meaning and fulfillment.

Even workers with years of experience or deep technical expertise have difficulty getting hired again.

Parker Lopez, a machine learning engineer and data scientist in Seattle, was laid off from his job at a health tech startup in May 2023. The last time he entered the workforce several years ago, it only took him three months to find work. But this time he applied for more than 1,000 jobs without any success.

“It feels very useless,” he said.

Even with several years of experience in software engineering, data science and manufacturing, including at Microsoft, Amazon contractor Jennifer Pearl said getting an interview was difficult. Pearl previously said they were able to get a job within days.

“I'm worried,” they said. “I've been doing this stuff for 20 years…and now I'm lucky to have a call back.”

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Some of the recent layoffs target middle managers who ran teams hurt in previous waves of cutbacks. Some of them are trying to return to jobs where they write code rather than directing the work of others, believing that these roles may be more secure. Workers who tried to jump from one company to another every three or four years to maximize the amount of stock options they could collect are now staying put.

Tech workers have also been subjected to a year of ongoing discussions about the AI ​​boom and its potential impact on the workforce. Many programmers are using AI tools to help them write code faster, and CEOs and tech pundits often talk about how efficient employees will be in the near future.

AI executives claim that as worker productivity increases, companies will make more money, leading to more growth and more jobs.

But tech workers themselves aren't so sure. Neither do economists.

“The technology sector may be able to produce a lot and innovate a lot without a lot of people moving forward,” said Zandi, the Moody's economist. “This is the lesson of artificial intelligence.”

Tech jobs, once attractive, high-paying, and highly desirable, have become less secure and less attractive for many in recent years. As a result, workers are more willing to accept a lower-paying job, make a side move, or seek alternative employment opportunities.

For a former UX researcher at Meta in the Bay Area, who spoke on the condition of anonymity to avoid hurting future employment prospects, the job search has been difficult since she was laid off last April. Originally working in academia, she joined industry to expand her knowledge and ensure job security, good benefits, and higher wages.

“It was the perception of stability,” she said of joining the tech industry. “And yet here we are.”