The era of tech layoffs is evolving in an interesting way

The era of tech layoffs is not yet past, but it is losing some of its intensity and changing into a unique trend.

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It isn’t surprising to see Microsoft cutting staff yet again, in addition to the roughly 10,000 workers it laid off earlier this year. The tech giant is slashing its sales headcount, which is usually one of the areas that technology companies tend to pare down when budgets are reduced. Recruiting, marketing, and client-facing roles are other areas commonly affected when tech shops decide to trim costs.

The recent layoffs at Crunchbase are a good example of this. In a spreadsheet that the business data platform released in conjunction with its recent staffing cuts, you can clearly see the areas where the startup felt it could afford to scale back: sales roles of varying seniority, customer success staff, marketing and recruiting. Heck, even Crunchbase News was hit. (Note: I helped build that team while I worked at Crunchbase and am a shareholder in the company from my time of employment.)

But there is change afoot in the realm of tech layoffs.

If you study the Layoffs.fyi database of tech staff cuts, you can spot an interesting trend budding. The number of tech workers asked to leave since we saw layoffs peak in January 2023 has come down steadily:

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Data visualization by Miranda Halpern, created with Flourish

That’s a very clear decline over time. Heck, the only month when we didn’t see a significant decrease was March, and in April the numbers went down by nearly 50%. By June, we were almost below the 10,000 mark. Not bad.

It would be simple enough at this juncture to clap our hands and move on with good tidings in our hearts. A decline in layoffs means fewer families disrupted and not as many folks who suddenly have to start worrying about rent and other necessities. That is good.

However, a wrinkle in the data caught my eye.

From the same source, observe the number of tech companiesknown to have cut staff in recent months:

Data visualization by Miranda Halpern, created with Flourish

There’s been a divergence since April: Fewer tech workers are being shown the door, but more companies are doing it. In other words, we’re seeing more companies make smaller cuts.

I think we’re moving past the era when tech companies were slashing head counts deeply and broadly. Instead, we are seeing smaller, more tactical cuts as these businesses seek to shave off the last bits of operational excess. For tech employees, this is generally good news, but the danger hasn’t passed for people who weren’t affected by earlier layoffs. The damage is simply being spread around more than it was earlier in the year.

There is much debate in the tech world as to who is at fault for all the layoffs we’ve seen since the tech bubble popped in late 2021. Some folks point to under-tasked or poorly utilized employees. During the boom, tech companies staffed more than they needed to, preparing for expected growth. Others blame the tech leadership for hiring freely before backtracking.

Insider recently joined the fray, noting that many tech companies are designed to afford power to managers with larger head counts, so managers hired more to increase their internal clout.

Show me the incentives and I’ll show you the outcome, right?

Ultimately, blaming staff for management choices is never fair, as you should conserve the onus for choices on the people who make them. And the present case of layoffs involving sales staff and similar is likely more driven by macroeconomic conditions than, say, laziness or malice.

Fewer tech layoffs doesn’t make it any easier for the people getting the pink slips today, but we can take a little solace in knowing that the sheer number of cuts is in decline. The only metric that needs to come down before we can close the book on this era of tech layoffs is the number of companies letting people go.

I suspect that if we don’t see any new macro shocks in Q3, we’ll head into the final quarter of the year on that track.