The Big Tech layoffs are a turning point - by Noah Smith

The end of the Second Tech Boom has played out in stages. First there was the big crash in tech stocks in the first half of 2022. Lower stock valuations caused VCs to pull back on startup funding. They also caused tech workers — much of whose pay comes in the form of shares — to take a big retroactive pay cut. Then later in the year, crypto imploded, which seemed to confirm that this was a general tech bust instead of a speed bump.

Now the latest shoe has dropped. Three big tech companies have now engaged in a massive wave of layoffs — 12,000 at Google, 10,000 at Microsoft, and a whopping 18,000 at Amazon. The first two of these are especially dismaying, because Google and Microsoft’s stock prices had managed to avoid the worst of the carnage in 2022 — previous big layoffs had come at companies like Meta and Salesforce, whose valuations had taken larger hits. If even the relatively healthy companies are being forced to make deep workforce cuts, it bodes ill for the entire sector. (The one big tech company that has avoided major layoffs so far is Apple, whose platform dominance and brand value have apparently allowed it to sail above the fray.)

I’m not sure that these layoffs tell us much more about the future of the tech industry than we already knew. But they probably do tell us something about the future of the tech job market. Over the past decade, compensation at the big tech companies — often called FAANG, even though that acronym doesn’t really apply anymore — soared to pretty incredible heights. And because these companies employed massive numbers of people and seemed to be always hiring, those high-paying jobs there weren’t nearly as hard to land as in, say, the quant finance industry. They also probably seemed pretty secure — when a company just grows and grows, you don’t see a lot of layoffs happening around you, so you don’t spend a lot of time thinking about the danger to your own job.

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