It’s not the dotcom bust of 2000, or the Great Recession of 2008. Instead, the tech layoffs now underway have their own distinct profile.
“I call this the ‘great reset,’ compared to the ‘great resignation’ we saw the last two years,” said Ahmed Banafa, a tech expert and engineering professor at San Jose State University.
The ongoing mass layoffs have affected more than 22,000 employees of tech companies headquartered in the San Francisco Bay area, according to the Layoff FYI dashboard, a tracker of tech layoffs since the pandemic. The majority of those layoffs were not in San Francisco or elsewhere in the Bay Area. Nevertheless, tech workers and local economists are concerned and already there is talk of a smaller real estate footprint at Meta.
And, the overall real numbers could be higher; some companies announcing layoffs didn’t disclose numbers. So far this year, tech-related job cuts nationwide have reached 121,677, and Amazon began laying off some 10,000 people this week.
Despite the attrition, employment at many of the companies remains above or near pre-pandemic levels. Meta’s workforce, for example, is still 64 percent higher than it was in 2019.
A sharp increase in tech job cuts was seen in the SF Bay Area since November.
The number was mostly driven up by big tech companies, which makes up for a small fraction of the total staff those companies have.
Meta, laid off 11,000 people last week – about 13{4224f0a76978c4d6828175c7edfc499fc862aa95a2f708cd5006c57745b2aaca} of its staff
Twitter, laid off 3,700 – about 50{4224f0a76978c4d6828175c7edfc499fc862aa95a2f708cd5006c57745b2aaca} of its staff
The 10,000 job cuts at Amazon, was 3{4224f0a76978c4d6828175c7edfc499fc862aa95a2f708cd5006c57745b2aaca} of its corporate employees and less than 1{4224f0a76978c4d6828175c7edfc499fc862aa95a2f708cd5006c57745b2aaca} of its global work force
A sharp increase in tech job cuts was seen in the SF Bay Area since November.
The number was mostly driven up by big tech companies, which is, however, only a small fraction of the total staff those companies have.
Meta, laid off 11,000 people last week – about 13{4224f0a76978c4d6828175c7edfc499fc862aa95a2f708cd5006c57745b2aaca} of its staff
Twitter, laid off 3,700 – about 50{4224f0a76978c4d6828175c7edfc499fc862aa95a2f708cd5006c57745b2aaca} of its staff
The 10,000 job cuts at Amazon, was 3{4224f0a76978c4d6828175c7edfc499fc862aa95a2f708cd5006c57745b2aaca} of its corporate employees and less than 1{4224f0a76978c4d6828175c7edfc499fc862aa95a2f708cd5006c57745b2aaca} of its global work force
Data Source: Layoffs.fyi. Chart by Chuqin Jiang.
Still, the cuts have been large in the context of the last year. The number of jobs cut announced by companies headquartered in the Bay Area since October surpassed the number during the prior nine months, making up 61 percent of the cuts so far this year. And the recent wave is mostly led by big tech companies, including Meta (11,000), Twitter (3,700), Salesforce (1,000), Stripe (1,000) and Lyft (700).
Ted Egan, San Francisco’s chief economist, said it’s too early to gauge the impact on the city economy. Nevertheless, he pointed out that, even after the bloodletting, the unemployment rate in San Francisco is still lower than in other parts of California.
He couldn’t estimate how long it may take for downsizing companies to rehire people. “But one thing is certain: If the tech company labor market slows down and more people lose their jobs, they will spend less. Which is not good news for the local economy.”
The driving factors behind this wave of layoffs, however, are different than the dotcom bubble bursting in March, 2000, or the financial crisis in the fall of 2008.
San Jose State Professor Banafa, for one, lost his job in 2000 as a technical specialist for a tech company. He still remembers how volatile that economy was. Simply adding “dotcom” to a business could drive a company’s value, no matter the product or balance sheet, he said. “That was a bubble. So when it burst, it burst,” he added.
In 2008, the real estate crisis affected the financial sector, and 1.3 million people in California lost their jobs. It took the job market five years to return to its pre-recession levels.
This recent wave, however, is more geographically clustered in Silicon Valley, where most tech companies and start-ups are located. Most of the companies cutting back expanded their workforce hugely during the pandemic to cope with users being at home and online, both ordering and working.
Even though many employees still partially work remotely, that big shift is over, said Banafa. “Now, the companies are trying to go back to the same size as before the pandemic. They have to get rid of people that they just hired.”
He said the first targets are often those people who work from home, non-technical departments, and new employees.
After the lay-off, many companies still remain similar or larger size as pre-pandemic time.
Among the top six west-coast companies which lay off the most employees in Nov., only Twitter and Lyft downsclaed their workforce comparing to 2019.
Note: The bar length is adjusted within every company, which means the bars across the companies
are not comparable. Stripe is not included because the employee count data is not available.
After the lay-off, many companies still remain similar or larger size as pre-pandemic time.
Among the top six west-coast companies which lay off the most employees in Nov., only Twitter and Lyft downsclaed their workforce comparing to 2019.
Note: The bar length is adjusted within every company, which means the bars across the companies are not comparable. Stripe is not included because the employee count data is not available.
Data Source: Macrotrends and Statista. Chart by Chuqin Jiang.
Apart from the larger picture, different companies also face unique challenges. Meta, for example, has spent billions on the Metaverse Initiative by its CEO, Mark Zuckerberg, and faces fierce competition with TikTok. Twitter is another special case, as no one can truly predict its new leader, Elon Musk’s, next move. Already, he’s halved the number of employees, and then asked some of them back.
The impact is not as big or bad as the previous two waves of unemployment, because it’s a very targeted, specific sector of the economy, noted Banafa. People who just lost their jobs still have plenty of new opportunities compared to decades ago.
“And there is a very well-known phenomenon here in Silicon Valley,” Banafa said. “After every big event, which is like a bubble or what happened in 2008 and now, new companies are born out of that. They rise from the ashes.”
The Bay Area unemployment rates are still lower than the statewide level.
During the dotcom bubble, the tech industry in the Bay Area was hit hard. It recovered faster from the 2008 crisis and the pandemic than other parts of the state.
The Bay Area unemployment rates are still lower than the statewide level.
During the dotcom bubble, the tech industry in the Bay Area was hit hard. It recovered faster from the 2008 crisis and the pandemic than other parts of the state.
San
Francisco-
Oakland-
Hayward
San Jose-
Sunnyvale-
Santa Clara
After dot-com bubble, silicon valley saw a sharp rise in unemployment rate
In 2008 and 2020, the Bay area did better than the rest of California
Data Source: US Bureau of Labor Statistics Chart by Chuqin Jiang
As the inflation rate slowed to 7.7 percent in October, the lowest rate since January, Egan said we are still in the stage of “fixing the problem.”
Banafa said the companies are likely to wait for more recovery signs before they stop cutting costs by reducing office space and laying off employees.
“It’s like the yellow sign on the traffic signal,” Banafa said. “We’re going to see if it’s gonna go red, or it’s gonna go green.”
