2022 was a year of layoffs for much of the tech industry, and analysts think it will continue until at least the first half of 2023. This is a major outlier from the past when the perpetually booming sector saw big tech valuations top a trillion dollars and companies ferociously staffed up their empires.

Big companies like Google and Amazon touted themselves as job creators and stimuli for their local economies, but in the past year, macroeconomic trends like high-interest rates and lower ad spending have thwarted what has recently been a stunning period of growth.

Google announced the laying off of 12,000 people, about 6% of its staff, the largest-ever job cut in the company’s history which cuts across all of Alphabet’s units and geographies. This follows news from Microsoft that announced it will be eliminating about 10,000 jobs. This is especially worrying since Microsoft is known internally for job security.

The downsizing has affected tech juggernauts and startups alike. Facebook parent Meta, in November 2023 slashed 13 percent of its workforce, laying off 11,000 people. Amazon’s was almost as severe as Meta’s, with a 10,000 cut. After Elon Musk took over Twitter in October, he axed roughly half its workforce at 3,700 employees, while many more left voluntarily.

Smaller companies suffered similar fates: Payments company Stripe laid off 1, 050 people. Noom, a health and fitness app, got rid of 1, 095 people. And Kraken, the crypto exchange, let go of 1, 100 employees. Some 152,000 employees were laid off in 2022 from more than 1,000 companies, according to the website www.layoffs.fyi.

Why are Tech Companies Laying Off so Many People?
The stated reasons are economic uncertainty (external factors) and poor performance (internal factors).

Shrinking advertising budgets and the implosion of the cryptocurrency market are also factors that may have influenced the decision to cut headcounts. Twitter and Snapchat fall into the former bucket, while Coinbase and Kraken fall into the latter.

Part of the pullback is due to the pandemic. As people were quarantined in 2020 and life suddenly moved online, companies hired in droves. Now as life returns to a pre-pandemic rhythm, those companies are correcting that overzealousness in staffing.

Analysts also think the mass adoption of AI is also responsible for the mass layoffs, especially in companies like Amazon and Google.

Does this have any immediate payoff?
The economic conditions have prompted the industry to take an existential look at itself and focus more on core strengths, after years of trying to diversify revenue.

For years, Google parent Alphabet tried to build a reputation as a moonshot company, investing in audacious projects like high-flying Wi-Fi balloons, smart contact lenses, and delivery drones. Facebook bet the entire company on the metaverse, as the next big computing platform.

So far none of those bets have paid off, and coupled with dire economic straits, companies may try to reset and invest more in the core products that made them juggernauts. That could mean Google focusing more on search and productivity apps, and Facebook homing in on its social networks.

There will also be more democratization of tech services; as smaller companies and start-ups will be able to access tech services. Also, many start-ups are expected to spring due to the abundance of free resources in the float.

Are the days of humans over?
Noy yet over, analysts believed.
Humans are responsible for the curation of the automation and optimization that led to the acceleration of AI.
Without the engineers, there will be no AI, hence, In the long run, the organizations of tech will return to human resources.
Robots can only give out what it has been fed, yet AI is not perfect yet, and still need a lot of training and machine learning.

The laying-off trend is believed to be a temporary setback and the power will fall back to humans.

This, really, is a reflection moment for tech.