Ever since tech stocks began slumping last year, the industry — with Meta Platforms, Alphabet and Amazon.com being the most prominent companies — has been conducting mass layoffs to right-size head counts after a hiring binge during the pandemic. Companies were also under pressure to appease investors who became newly focused on profits rather than growth and sizzle. The layoffs cast a pall over the entire labor market, with workers worried about whether the contraction would spill over from the tech sector to other parts of the economy the way they did during the dot-com bust in the early 2000s.
But an unexpected savior has come riding to the rescue of tech workers, at least for now. Companies and investors are hyped up about what artificial intelligence could mean for future profits, and worried about what it could mean if they're left behind. And while AI may eventually destroy millions of jobs, the products and services that will be responsible for that don't yet exist. Companies have to build them, and they'll need tech workers for that.
After a year of layoffs, the past month has given us evidence that tech employment is stabilizing, even perhaps turning up a bit. The website layoffs.fyi has been tracking tech layoffs since the start of 2022. After rising through the year to a peak in January, layoffs have declined for three consecutive months. April had about as many layoffs as we saw last October.
If the job cuts were the result of excess hiring during the pandemic and slumping stock prices, there comes a point when companies have done enough. A year is a reasonably long time for a head count correction, and tech stocks have risen quite a bit in the past few months, suggesting investors are satisfied with the progress. In his company's earnings conference call last week, Meta Chief Executive Officer Mark Zuckerberg said that the company would conduct its third round of layoffs in May, but after that, "we're going to have a much more stable environment for our employees."
With stock prices stabilized and head counts now at an appropriate level, the theme coming out of tech companies this quarter was all about AI: what it will mean for their businesses and their investment plans for capitalizing on it. I'm agnostic on the merits of the investments we'll see tech companies make in this direction. After seeing all the white whales the industry chased in recent years, from autonomous vehicles to voice assistants to the metaverse, I'm not so sure investors should feel good about what's coming, either.
But tech workers should breathe a sigh of relief over this development. Nobody's going to build an AI empire by continuing to cut jobs — or at least, that's what investors will assume. If you're still cutting jobs in the second half of 2023 while Microsoft and Zuckerberg are making AI investments, maybe you're a chump, or you don't have an AI plan. No CEO can afford that perception.
Interestingly, there's evidence this shift from cost cutting to investing in AI is already showing up in labor market data. The jobs website Indeed.com keeps track of job postings over time, and since the middle of April new listings — those posted within the past seven days — for software developers have risen by 30%. It's a volatile data series, but the uptick and the timing of it make sense given the recovery in stock prices and corporate commentary on staffing levels and AI plans.
If AI ends up being the job-destroying force that some fear, we'll cross that bridge when we come to it. In the short term, the promise — or at least the hype — of AI is shifting tech company psychology from profit-maximizing cuts toward another potential arms race as companies fight to win the future. And that could be good news for everyone. A stabilized job market for tech workers is yet another bulwark against the recession that most people continue to fear but that keeps being pushed off into the future.
