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Economic uncertainty means disproportionately high layoffs in the tech sector

By Percy Jarvis, Staff Writer

Data from Finbold details that there have been more tech sector jobs laid off in 2023’s first quarter than across the entirety of 2022, a sobering reality. The tech sector’s record of job growth and stability make this only more disquieting, however, this all comes in response to the challenges presented by an ongoingly uncertain global economy.

In the face of this unpredictability, it seems tech companies, needing to maintain productivity, have resorted to cutting their workforce. Additionally, the trailing off of the pandemic, which created a huge boom in tech demand, has created only further difficulty for the tech industry specifically. Nonetheless, this demonstrates a time of challenge and change for the tech industry to which the most successful companies will adapt and adapt well.

166,004 tech industry layoffs were reported in the first quarter of 2023, spread across 563 companies, over half of which (53%) came in January making up the greatest monthly share. This comes in above the total number of layoffs for 2022 – 164,411 – though interestingly this number was spread across over double the amount of companies (1,216). Notwithstanding the fact that these numbers could be inaccurate as not all layoffs are reported, this still seems to demonstrate a striking shift.

Breaking it down, the top five tech companies cumulatively laid off 57,000 employees (34%) in Q1 2023: Amazon had 17,000, Alphabet (Google’s parent company) had 12,000, Meta and Microsoft let go of 10,000 each and Salesforce had 8,000. Additionally, a separate review of 2022 layoffs within tech showed the retail sector to lead with 20,914, followed by the consumer sector (19,856), transportation (5,977), healthcare (15,058) and finance (12,899).

The report tracks all this back to concerns around economic uncertainty: “Most companies that have laid off employees cite various factors, including economic uncertainty, rising interest rates to combat inflation, and sluggish sales. Consequently, many tech entities have resorted to layoffs to optimise operations and achieve efficiency. The layoffs have coincided with a period where the tech sector emerged from the pandemic, which saw a surge in demand for digital products leading to overhiring amid the health crisis to meet the growing demand.” This is somewhat surprising, however, as historically the tech industry has remained resilient to a fluctuating economy.

Additionally, some critics of the layoffs have linked the exceptional level of layoffs more to herd mentality and retaliation against workers who leveraged their position in a previously tight labour market for better wages and working conditions. Nonetheless, it remains a fact that the sudden unprecedented demand for tech, stemming from the pandemic, likely prompted tech companies to overhire, especially given it was near impossible to speculate on when the pandemic would end. Now that the pandemic has to some extent ended, said demand is likely waning, leaving companies with an overfilled workforce in an uncertain global economy.

Overall, these layoffs cast doubt over the stability of the industry, doubt only bolstered by the recent rise of AI. AI brings about scope for jobs to become redundant, indicating that this striking trend in layoffs could ultimately only continue. However, in this sea of challenges, there is scope for growth and innovation, especially where AI is concerned; tech companies that adapt well to these new challenges can hopefully ensure more stability in the future.