The dust has mostly settled on the job cuts that kicked off 2023. With workers in the tech sector taking the biggest hits, the long-term effects on the IT talent are still playing out.
Customer reticence and a stubborn inflation rate led to hundreds of thousands of job cuts across the economy, many centralized in big tech. Self-reported layoff tracker Layoffs.fyi found 485 companies let more than 138,000 workers go so far in 2023.
A notable example is Facebook parent company Meta, which on Tuesday announced it plans to cut 10,000 jobs. It's the second round of layoffs to hit Meta in recent months. The company let 11,000 workers go in November, citing the effects of a macroeconomic downturn.
One of the themes emerging from the layoffs is a message of efficiency from management teams to investors, according to Art Zeile, president and CEO of DHI Group. But a clearer sign is the realignment of hiring trends after a boom cycle.
What was once a spike in hiring is coming undone — companies began to pull back from their efforts to attract technologists in droves.
"We overreacted, and now the pendulum is swinging the other direction, but we're going to correct back to some kind of a regression to a mean," said Zeile. "That's what we're in the midst of doing right now."
Another more complex thread beneath the layoffs cycle is a normalization of workforce numbers.
Companies saw massive growth as the effects of the pandemic tapered in 2021. Many overshot their growth projections when hiring, and cut jobs as a reaction to lackluster revenues. Despite the correction, the demand for IT skills remains, though the growth is slower than in recent years.
Yet, through hiring appetite changes, long-term talent attraction will remain important for technology executives, with recruitment and retention practices a must.
"In some ways, what was happening in most of 2022 was companies outside of technology were being starved of talent because tech was throwing a lot of money at the labor pool," said Jimit Arora, partner at Everest Group.
Hundreds of thousands of layoffs still have an impact, and the tech labor market is unlikely to simply return to past hiring patterns, in which companies fought to attract every tech worker they could.
Labor market effects
A series of layoffs meant thousands of qualified workers in the tech sector were suddenly looking for their next gig at the start of the year. While this could potentially ease hiring constraints in sectors beyond big tech, the effect is not immediate.
U.S. Bureau of Labor Statistics data show the number of people in tech roles across the economy contracted slightly, with last years' hiring push serving as a high-water mark.
Despite dips, tech occupation employment remains well above pre-pandemic levels.
The effect of layoffs in tech is beginning to reflect in official employment data, Tim Herbert, chief research officer at CompTIA, said as the U.S. Bureau of Labor Statistics report for February was released. But a wider lens is critical to understand the current situation.
"The recent pullback represents a relatively small fraction of the massive tech workforce," Herbert said in an email. "The long-term outlook remains unchanged with demand for tech talent powering employment gains across the economy.”
There is evidence to suggest that, for most laid-off workers, the revolving door leads right back to a career in tech. Though the research came out before the mass layoffs of early 2023, workforce intelligence company Revelio Labs found that within three months of receiving layoff notices, more than three-quarters of laid off workers were able to find another job, according to a December report.
"I believe that there is such a huge demand for technologists that still persists that anybody that wants a job can turn around, apply and get that job almost immediately," Zeile said.
Some early signs are emerging that a further slowdown in tech hiring is reaching specific job categories, such as software developers, as more companies pull back their headcount projections from the heights of 2021.
The number of job postings for software engineers has begun to fall, according to Indeed data. Slowly, the demand for software engineers is dipping toward pre-pandemic levels, after steadily growing for all of 2021 and part of 2022.
"There is a higher proportion of software professionals employed by tech sector companies, so some of the pullback in job postings reflects the ongoing layoff announcements," Herbert told CIO Dive.
After rising sharply, the number of tech job postings are approaching pre-pandemic level
For some businesses, layoffs were more of a readjustment in the workforce, with companies eliminating more senior positions while retaining junior-level technical talent, according to Arora. This is likely to trickle down, shaping dynamics in the labor market overall.
"Entry-level, junior talent will remain in demand, but I think an oversupply situation that we might see would be more on the senior talent base," Arora said.
CIOs can't hire their way out of the talent crunch that persists, said Janelle Hill, chief of research for Gartner's CIO practice.
"They have a couple of different strategies: one is to retrain their own people in new skills," said Hill. "The second big one is to identify employees that work for their company whose job entails a significant technology component."
Talent demands will require a more concerted effort on workforce development efforts, such as partnering with diverse tech talent organizations and rethinking what, exactly, is a technology worker.
Tech salaries take a hit
The aggregate effect of shifting labor dynamics is beginning to touch tech worker compensation, too.
Most tech salaries leveled off from steep pandemic gains
A cooler hiring market has given way to salary normalization. Data suggests tech worker pay is still growing, but at a more modest rate than in recent years.
"There is possibly a little bit of impact due to the layoffs, and the fact that it is shifted more towards being a buyer's market than a seller's market," Zeile said.
Salaries in tech grew 2.3% last year, below 2021’s 6.9% growth rate, according to a Dice report.
But, for context, 2021's growth rate was a statistical anomaly, the highest salary increase rate in the history of the report, which dates back more than 17 years.
"It's almost like taking a breather after a real period of almost sticker shock in terms of the cost of talent in IT," said Zeile.
— Matt Ashare contributed reporting to this story.