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Have tech layoffs peaked?

Published about 1 year ago • 3 min read

Welcome to Nonrival, the newsletter where readers make predictions.

How it works

  1. On Sundays, read the newsletter and make a forecast by clicking a link at the bottom.
  2. On Wednesdays, see what other readers predicted and how your forecast compares.
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In this issue

  • Make a forecast: Have tech layoffs peaked?

Thanks for forecasting. Send feedback to newsletter@nonrival.pub.

​Have tech layoffs peaked?​

Nearly all the big US tech companies have announced major layoffs over the past three months, including Google, Meta, Amazon, Microsoft, Salesforce, and Twitter. (Apple is the exception.) Nearly 70,000 tech workers have been let go in January alone, according to Layoffs.fyi. For comparison, only about 7,500 tech workers were laid off per month in the first half of 2022.

But has the turbulence in tech finally peaked?

Make a forecast:

How likely is it that there will be 30,000 or more tech layoffs in either February or March?

​~10% chance (Very unlikely)​​

​​​​~30% chance (Unlikely)​​​​​​

​​​​~50% chance (Uncertain)​

​​​​​~70% chance (Likely)​​​​​

​​​​~90% chance (Very likely)​​​​​

^Click a link to make a forecast. Or, read more below and then scroll back up and forecast.

This question will resolve based on data from Layoffs.fyi, which tracks global tech layoffs. More detail at the bottom of the email.

Indicators

Background

For a sense of scale, the single biggest tech layoff recorded in January was Google at 12,000 employees. Despite lots of tech layoffs, overall unemployment remains low as does the layoff rate in the broader US economy.

The tech-heavy Nasdaq has risen for four weeks in a row after falling 33% in 2022. Slowing inflation has some analysts hopeful that the US can achieve a “soft landing” and avoid recession.

But venture capitalists still aren’t investing like they were in 2021, which could leave later-stage startups short on cash.

Perspectives

Why tech layoffs? Interest rates and post-pandemic reversion to the mean

“The foremost issue for tech companies is interest rates, which Powell has been hiking sharply for the past year… The second major factor is a reversion to the mean after the intense early years of the pandemic. That awful period was in some ways a good one for tech firms… Flush with new revenue and bolstered by low borrowing costs, tech companies expanded… There’s some good news for tech firms, though. Many are still wildly profitable. The Fed is likely to stop hiking interest rates soon. Artificial intelligence has started making amazing breakthroughs—ones that regular consumers can finally understand, see, and use. Maybe a tech summer is just around the corner.” —Annie Lowrey, The Atlantic, Jan. 2023​

Or, a bad ad market and CEOs copying each other

“Many people predicted that the digitization of the pandemic economy in 2020, such as the rise in streaming entertainment and online food-delivery apps and at-home fitness, were ‘accelerations,’ pushing us all into a future that was coming anyway… But perhaps the pandemic wasn’t really an accelerant. Maybe it was a bubble… The second explanation for this weird moment is that … when interest rates were low, investors valued growth narratives… When inflation and interest rates increased, the companies that were making long-term promises were most at risk, and they got clobbered… A third explanation is that much of the slowdown in tech and media is really a slowdown in advertising… The final explanation is that chief executives are normal people who navigate uncertainty by copying behavior… When all of your competitors are laying off 10 percent of their staff—and being rewarded by the market for it!—culling 10 percent of your workers may seem like the right or inevitable thing.” —Derek Thompson, The Atlantic, Jan. 2023​

What about Apple?

You’ll notice one company is conspicuously missing from this wretched list, and that’s Apple, which at least until now, has remained on the sidelines when it comes to layoffs. It’s worth noting that the company hasn’t had a history of big layoffs, and the last big one was back in 1997… While the other organizations were adding gobs of employees, Apple has hired at a much more modest rate than its large tech company counterparts, adding only 17,000 employees during 2020-2022. —Ron Miller, Techcrunch, Jan. 2023​

And what about startups?

“When I asked startup hiring experts what we can expect from layoffs in 2023, Continuum founder Nolan Church told me: 'I think we’re going to double what we have done so far.' … Tech startup consultants say layoffs are likely to rise in 2023, in part due to how many startups raised massive amounts of money in 2021 at high valuations that cannot raise in today’s fiscal environment.” —Keerthi Vedantam, Crunchbase, Jan. 2023​

The fine print

Just want to make a quick forecast? Click a link at the top of the email and you're done! Your forecast will be recorded.

Or, click a link and finish the survey. You can make your forecast more precise and guess what other readers will say.

Deadline: Make a forecast by 9am ET Tues. Jan. 31.

Resolution criteria: The question will resolve based on total layoff data from the website Layoffs.fyi. The site includes public reports of tech layoffs, globally, not just the US.

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