In the conclusion to our December analysis of the tech layoffs of 2022, we warned that there was no way of knowing if the phenomenon was over yet.
The month of January 2023 has now confirmed the need to be cautious about discussing these events in the past tense, as the number of layoffs skyrocketed yet again, even exceeding the peak figures of November 2022.
Professionals in all fields of tech are understandably worried. How long will this time of uncertainty continue? Are we finally over the hump after this terrible January, or must we prepare for worse yet to come?
Let’s look at the most recent numbers and see what conclusions these allow.
Overview: What happened in January
Both of the most popular trackers for layoffs in tech, TrueUp.io and Layoffs.fyi, registered in January a new record in the number of monthly layoffs. For Layoffs.fyi, roughly 83,000 people lost their jobs in January, up from the previous record in November of 52,000 people. For TrueUp, the number of professionals affected is no less than 106,000, more than doubling the peak of 50,000 in November.
For most of 2022, staff reductions were being implemented primarily by small-to-medium sized businesses. What made January unusual is that this was the first month when most of the employees who lost their job came from the titans of the tech industry – those companies that for years were believed to be untouchable.
To wit, on January 4th Amazon and Salesforce both announced the layoff of 8000 of their staff (in the case of Amazon we are looking at the second tranche in a total reduction of 18,000 people initiated in November, although the TrueUp tracker seems to roll all of these into their January figures). On the 18th, Microsoft let go of 10,000 people, followed by Google on the 20th with 12,000. IBM followed suit on the 25th with 3900 employees, and SAP the day after that with 3000. Philips finished off the month with a layoff of 6000 people on the 30th.
That comes to a total of almost 51,000 layoffs from these six companies alone. That’s almost two thirds of Layoffs.fyi’s total, and, adjusting for the Amazon 10K discrepancy mentioned above, half of TrueUp’s total.
The majority of the companies affected by the phenomenon is distinctly American, but players all over the world have felt the effects. SAP is German and Philips is Dutch, while layoffs ranging from 400 to 900 people were also announced by Spotify in Sweden, Sophos in the UK, Black Shark in China, ShareChat in India, and Rappi in Buenos Aires.
Ok. So what do these figures tell us?
While there is no argument that the figures for January make it the worst month of tech layoffs so far, they are also uniquely skewed by the reductions that took place at the bigger corporations – which are, necessarily, on a scale of their own.
Of the 5 biggest rounds of reductions recorded since the beginning of 2022, no less than 3 happened this past January, including the largest of them all so far, Google’s layoff of 12,000 people (the other two were Microsoft’s and Amazon’s). Consider the top 10, and last month still includes 5 of them.
Notice that the previous worst month, November 2022, also witnessed prominent reductions by big players like Meta, Amazon and Twitter. This is a fairly recent development; as an economic phenomenon, the tech layoffs started at least as early as May 2022 and possibly earlier. However, except for two relatively contained reductions by Tesla and Microsoft in June and July 2022, it was mostly the mid-to-smaller fish that were affected.
How did these small-to-medium firms fare in January 2023? Interestingly, they appear to be laying off workers at an only marginally higher rate than they were in summer of last year. This isn’t exactly a cause for celebration – those rates were already high – but the point is that recent developments seem to have changed the status quo only for the tech giants, not for everyone else. The rest of the industry behaved consistently with the patterns we saw last year. Not better, not much worse – just consistently.
The picture that emerges from January 2023 is not so much that the economic conjuncture which causes layoffs in tech is getting worse. Rather, it looks more like the bigger players, heretofore shielded from this conjuncture thanks to their size and prestige, have finally (and belatedly) felt the effects too.
Indeed, it is impossible to look at the January 2023 figures without feeling that many of these new negative records simply represent the industry catching up with events that have already come and gone. Witness the layoffs by Coinbase and Spotify, two companies which saw their market valuation absolutely decimated from Q4 of 2021 to Q3 of 2022 (Spotify dropped from €249 to €92 per share, Coinbase from €296 to €47), and yet only implemented cuts to their workforce this past month.
In brief, the raw number of tech layoffs may be getting worse, but the underlying economic processes that are causing those layoffs are not (or at least they show no signs of getting worse). The bad news, of course, is that they are also not getting better. In any case not yet.
Where does that leave us?
The January data suggest some very mixed conclusions. On one hand, the fact that the industry as a whole is belatedly readjusting to an economic downturn that started as early as one year ago gives some cause for optimism – once the readjustment is complete, the number of layoffs should start normalizing (ergo, decreasing).
The trouble is that it seems very difficult to estimate when this readjustment is likely to be complete. We remarked at the end of our article two months ago that the tech industry as a whole remains vibrant and with strong prospects. Indeed, even faced with the January numbers, economists remain optimistic about tech. But this doesn’t mean that the roller-coaster ride is over.
There is an infographic that has gained some traction on social media, originally featured in this article by Yahoo Finance. It compares the number of new hires since the outbreak of the pandemic with the recent layoffs:
What do we learn from this infographic? On one hand, it demonstrates that the industry’s recent ailments are still very small – even negligible – when evaluated in the context of its overall expansion trend. Tech is not in decline – on the contrary, in the grand scheme of things it’s still booming, even now.
On the other hand, the infographic also shows that there remains a substantial margin for readjustment of the labour force. How many of those 746,000 extra employees hired by Amazon are still potential ‘overhires’, even after 18,000 of them already got the axe? The truth is that we just don’t know.
Outside of some veritably shocking macroeconomic turn, the future of tech remains assured. The industry is in a better position than most others and is still one of the safest bets for modern career changers, because – and not in spite of – the speed with which its internal landscape changes. But its short-term future finds itself at a moment of inherent unpredictability.
The ongoing process of readjustment meant that things had to get worse before they could get better, and there is no question that things will eventually get better. Whether the worse is over or yet to come, however, is something we are unfortunately not yet in a position to say.