What’s Going On?
In recent months, layoffs at tech companies have been making the news. Whether Microsoft
announcing layoffs of 10,000, Meta announcing layoffs of 11,000, or Amazon announcing
layoffs of 18,000, an apparent sudden shift in the job market can spark stress and
uncertainty – especially in a tech hub like the Pacific Northwest.
Background
In the last few years, the tech industry – and especially tech giants (Alphabet, Microsoft,
Amazon, Meta) – have been on a hiring spree. The bulk of this hiring occurred during and
following the onset of COVID, when the combination of 1) companies adjusting to “going
virtual” required the technological resources to do so and 2) rock-bottom interest rates
creating “cheap money” helped create a hiring spree in the tech industry.
As inflation became a growing concern and the Federal Reserve pivoted to aggressive rate
hikes, the era of “cheap money” vanished and companies began taking a more cautious
approach. Where tech companies could look for acquisitions with relatively inexpensive
lending just a year ago, they must now shift to tightening their belts.
Reversion to the Mean
In an area like the Pacific Northwest, the concern about the tech industry purging some of
the hiring sprees over the past couple years is very real and justified. Zillow, Redfin,
Microsoft, Amazon, Tableau…we all have someone dear to us who works at one of these
companies. If you or a family member or friend are among the impacted, putting these
layoffs in the broader context will do little to help you sleep better.
However, the hiring spree of the last few years and the recent string of layoffs belong in the
broader context:
• Microsoft may be laying off 10,000 laid off employees but it added 40,000 new
hires to its workforce for its most recent fiscal year. Periods of dramatic growth are
followed by some inevitable period of contraction.
• After Meta lays off its announced 11,000 employees, it will still have nearly 70%
more employees than it did three years ago.
• After Amazon lays off its announced 18,000 employees, it will still have a little more
than 80% more employees than it did three years ago.
We do not believe that the sky is falling – the weather is just a bit more overcast than it was
previously.
Sources:
1. https://www.nytimes.com/2023/01/23/technology/tech-interest-rates-layoffs.html
2. https://www.seattletimes.com/business/microsoft-to-cut-10000-jobs-including-878-in-seattle-area/
3. https://www.geekwire.com/2023/commentary-washington-states-tech-industry-will-continue-to-
grow-despite-layoffs/