Tech Layoffs Exceed the Great Recession, and 2023 Might Be Worse

The year has been full of ups and downs, but one thing that has remained steady is the string of layoffs that have hit every industry. However, tech companies have suffered more than most, including startups and tech giants alike. Big Tech has started to accept the new reality, and it might not change in 2023. In fact, it might be worse.

Lower demand has led to layoffs and hiring freezes. Many factors have contributed to the decrease in demand, including the economic situation which means less consumer spending and fewer investments. When combined with the previous overhiring in the past few years, the decreased demand is driving toward a recession.

• According to a research note by investment bank Jefferies, more cuts are inevitable.
• Many companies rapidly expanded during the pandemic, but growth slowed, and layoffs were necessary to avoid losses.

Over 210,000 tech employees experienced layoffs this year. However, 2022 did not start off with a massive amount of layoffs. Instead, things started relatively slow before ramping up massively in the fourth quarter, during which time more than 40% of the people were let go.

• Nearly 56,000 tech employees were laid off in November alone, with numbers for the entirety of December not included in the count.
• Data from layoffs.fyi, a database of tech layoffs, counts close to 250,000 layoffs across almost 1,500 companies since the start of covid.

While no industry is safe, it seems most rampant in tech, where some of the largest companies are letting go of large numbers of employees. Meta announced a plan to lay off 11,000 employees in November. Meanwhile, Twitter’s layoffs have made the news countless times as Elon Musk lets employees go left and right.

• Other tech companies letting employees go include Amazon, Microsoft, Netflix, DoorDash, and Salesforce.
• The problem affects companies of all sizes, with small, medium, and large businesses all suffering setbacks. That includes promising startups.

Hiring freezes happened, even if layoffs did not at most companies. An example is Google, which did not implement layoffs during the period. However, the company and many others did enact a hiring freeze, and Google has announced that it might lay off employees with poor performances in 2023.

Underperformance did not help. Amazon, Meta, Microsoft, and Alphabet underperformed, losing a combined $350 million in market cap. Among them, Meta and Amazon stood out, with Meta seeing its worst week ever with a stock plunge of 24% and Amazon dropping 13%.

The numbers far exceed those seen during the Great Recession. In 2008, tech companies laid off around 65,000 employees, and 2009 was not much better. The tech workforce has grown since then, but the number of people laid off is still telling about the current conditions in the tech industry, and it is expected to continue.

When will the recession likely happen? Jefferies, which sent out the research note on the issue, estimates the beginning of the economic recession to occur sometime around the third quarter of 2023. Tech companies can control expenses, and layoffs are just another part of their strategy to remain viable and afloat into 2023 and beyond.