Two years of wrenching tech layoffs have weighed down the Bay Area’s job market in a big way — but experts say the impact has been somewhat mitigated by an industry realignment that’s led to significant hiring even as thousands of positions have been cut.
For decades, Silicon Valley has engaged in what tech insiders and sages call “creative destruction.” The current convulsions in the local economy may represent the latest iteration of that metamorphosis as companies execute lightning-quick shifts to artificial intelligence, clean tech and green energy industries.
“Tech is seeking new kinds of skill sets,” said Tim Bajarin, principal analyst with Campbell-based Creative Strategies, which tracks the tech industry. “Tech is in transition. Companies are rethinking their strategies and they are reinventing themselves.”
Still, with the tech employment cross currents as a backdrop, one thing seems certain: The tech industry’s decades-long boom and bust patterns have once again arrived at the bust part of the cycle. The cuts have spanned the breadth of the industry, from management positions to rank-and-file software developers and others.
“Many companies over-hired during the pandemic,” said Bajarin. “Questions are arising about the overall economy, with inflation, interest rates and so forth.”
Despite the brutal impact of the ongoing regional layoffs, the current staffing reductions are nowhere close to the cataclysm that demolished the region’s tech industry during the dot-com meltdown two decades ago. Over four years, from December 2000 — the peak of the dot-com hiring binge — to December 2004 — roughly the depths of that downturn — tech companies jettisoned a whopping 193,200 jobs, a stark decline of 26.9%. About one-fourth of the region’s tech jobs were wiped out during that stretch.
Now, during a stretch of slightly over two years — covering 2022, 2023 and the early weeks of 2024 — tech companies have slashed more than 36,000 jobs in the Bay Area, according to WARN layoff notices filed with the California labor agency.
“What is going on now still hurts, but it’s not like we are losing an entire industry,” said Steve Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. “Some divisions in tech companies are shrinking and some are growing.”
During the dot-com era, countless dot-com companies beguiled investors with visions of profits conjured by business plans that in some cases were simply bad ideas, and in other cases were somewhat ahead of their time. The ensuing massive layoffs jolted Silicon Valley and the rest of the Bay Area.
In this cycle, the tech industry’s woes aren’t the result of dot-com vaporware. Silicon Valley isn’t being engulfed by cascades of bankruptcies or business failures.
Instead, household names in the tech industry, including Meta Platforms (formerly Facebook Inc.), Google and Cisco have purged jobs in a widespread quest to correct their over-exuberant hiring during the coronavirus pandemic.
As the coronavirus erupted worldwide in 2020, wide-ranging business shutdowns prompted countless people to work from home or other remote locations. The shift away from the office unleashed a demand for services and hardware. That demand has cooled drastically as people return to work on-site, in stores and at restaurants.
But other companies, and even some of those laying off workers, are hiring, meaning matters are far from hopeless, even for displaced tech workers.
“Despite the layoffs, there’s a resilient job market for tech workers, especially for those with versatile skills and a willingness to pivot into new areas,” said Tony Avila, a franchise owner in the South Bay with Spherion, a staffing services company.
A push is well underway to hire people for rising industries such as artificial intelligence.
“We’ve observed a steady demand for specialized talent,” Avila said. “Many are finding opportunities in emerging sectors within the tech industry.”
Some copycat activity may be a factor in the layoffs. The decision by Meta and its top boss Mark Zuckerberg to pursue massive layoffs encouraged other tech giants to do the same, experts say.
Tech companies seek heightened efficiency, even if that means a reduced headcount, said Russell Hancock, president of Joint Venture Silicon Valley, a San Jose-based think tank.
“Zuckerberg decided that 2023 would be the year of efficiency,” Hancock said. “A lot of companies decided that efficiency would be the new fad in Silicon Valley. Tech companies want less office space, fewer perks and fewer employees.”
In 2023, tech companies chopped 14,600 Bay Area jobs, as measured by the technology industry’s job totals in the Bay Area, according to seasonally adjusted job numbers compiled by Beacon Economics that were derived from state Economic Development Department reports.
During the dot-com meltdown, tech companies slashed an average of 48,300 jobs a year, based on the aggregate loss of 193,200 jobs during those four years. This means tech job losses in the Bay Area during the dot-com debacle were three times greater than the number of tech jobs lost in the nine-county region in 2023.
While tech companies revealed plans to cut slightly less than 21,600 jobs in 2023, as reflected in the layoff letters sent to the EDD, there was a net loss of only 14,600 Bay Area tech jobs in 2023. This means plenty of tech companies are still hiring at the same time they are laying off workers.
“There is nothing fundamentally wrong with Silicon Valley,” Hancock said. “With a lot of these layoffs, people are finding a way to land on their feet within three months of losing their jobs.”
These indications of growth at the same time cutbacks are occurring suggest Silicon Valley is again attempting to reinvent itself ahead of the next potential boom.
“When one part of Silicon Valley turns down,” Levy said, “there always has been something else that rises to take advantage of Silicon Valley’s talent and access to capital.”