The Bay Area tech sector is shedding jobs in a big way after a prolonged pandemic-era hiring boom, an ominous turn for an industry that has spent decades as the primary engine of the region’s economy.
Throughout its history, the tech industry has been known for its cycles of cataclysmic hiring downturns followed by equally dramatic upswings. But job losses in the early months of 2023 have unleashed warning signs, and even some soul-searching, in a sector that once again seems to have overstaffed for conditions.
“The best way to make sense of this is to understand that tech is having a ‘moment,’” said Russell Hancock, president of Joint Venture Silicon Valley, a San Jose-based think tank. “If you’ve been around long enough, you know that Silicon Valley goes through downturns like this, usually about every eight to 10 years.”
Long-time Valley watcher Tim Bajarin agreed. “Hiring and layoffs are not a precise science,” said Bajarin, a principal analyst with Campbell-based Creative Strategies, which tracks technology trends. “What is going on now is a correction from the over-hiring that occurred during the pandemic, when people were working from home.”
The rollercoaster ride began with the onset of the coronavirus in early 2020, which briefly shocked the tech sector into massive layoffs following government-mandated business shutdowns to combat the spread of the deadly virus. Tech companies, soon after the lockdowns began, chopped 58,400 Bay Area jobs, an employment reduction that lasted from February 2020 through June 2020, according to numbers compiled by Beacon Economics.
The lockdowns, however, changed the forecast. They ushered in new ways for people to work, collaborate and learn. Remote videoconferences became so prevalent that they became familiar strands of the worldwide economic and social tapestry.
“You had more customer support, more software and hardware for people to work from home,” Bajarin said. “People needed new computers, new printers, new software services, new video conferencing platforms, back-end services, more software.”
The unprecedented demand for remote connections fueled a fevered rush by tech companies to add workers throughout their organizations as the cutting-edge sector scrambled to keep up with what seemed an insatiable hunger for these new tools for jobs, schooling and gatherings that could be conducted at a distance. At least it seemed insatiable.
Within a year, the Bay Area tech industry had nearly overcome its coronavirus-spawned losses, adding 58,300 jobs from July 2020 through July 2021, according to the Beacon analysis, which was derived from the official monthly reports compiled by the state Employment Development Department.
And it kept going. For 30 months, the Bay Area tech industry hired and hired, and then hired some more.
All told, the industry added a head-spinning 130,000 jobs in the Bay Area, eventually reaching an all-time high of 951,300 jobs in December 2022. Tech companies produced net increases in jobs even during the final several months of 2022, a period when the sector began to disclose a disquieting number of layoff announcements.
But now, or at least during the very early stages of 2023, signs have emerged that hint that the tech sector’s latest bust has arrived. Much of the hiring slump is tied to both a retreat from remote work and distance learning as well as a plunge in the demand for personal computers.
International Data Corp., which tracks PC markets worldwide, forecasts that personal computer sales will drop 20% this year, Bajarin said.
In January and February of this year, tech companies shed 13,500 jobs in the Bay Area, according to this news organization’s analysis of the information produced by Beacon Economics. Tech companies cut 5,000 jobs in the San Francisco-San Mateo region, 4,500 in the East Bay and 3,900 in Santa Clara County.
“The recent tech job losses are real and likely to continue for a while,” said Steve Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. “The South Bay and region bounced back from far worse job losses after 2000 and I expect we will be resilient again after this year.”
Levy also noted that the Bay Area still added jobs overall when every industry was counted, which means that the region — so far — has been able to overcome the recent spate of tech staffing reductions.
But Jeff Bellisario, executive director of the Bay Area Council Economic Institute, noted that even after the recent job cuts, the tech sector remains well above the levels endured by the industry during the trough of 2020.
“The tech economy had an extremely strong run of employment growth through much of the last three years and is now responding to broad economic uncertainty by pulling back on workforce needs,” Bellasario said.
The current cutbacks include large-scale layoffs in the Bay Area by high-profile companies such as Facebook app owner Meta Platforms, Google, Salesforce, Twitter, Cisco, Amazon, Intel, Lam Research, Doordash and Tesla.
“What we are seeing is a correction,” Bajarin said. “But if you have skills in engineering, IT services, network security and software, there will be an upswing again.”
The current tough times might easily dismay some younger tech workers. But Hancock offered some perspective.
“We have a set of folks out there, millennials mostly, who have only known Silicon Valley as a booming economy,” Hancock said. “The patch we’re in now might cause some to panic, but the old-timers know to stay level.”
Source: www.mercurynews.com