The Big Tech Hiring Slowdown Is Here and it will Hurt
This issue was written in Oct 2022, sent out to all subscribers of The Pragmatic Engineer Newsletter in October 2022. The observations on how Big Tech hiring will slow down have since been validated, with Meta not only laying off in November, but also rescinding offers in January 2023, and Amazon doing the same. If you want to get the pulse of the industry in your inbox, subscribe.
In the latest issue, I deliberately did not go deep into recent layoffs, even though there have been some. Just to touch on them:
- Snyk – a cybersecurity startup valued at $8.5B let go 198 employees (14% of the company.) I broke this news about many engineering leaders and software engineers being affected.
- Mindbody – a subscription-based fitness marketplace, which bought ClassPass, laid off 400 employees on Wednesday 26 October. I also broke this news and my sources report those let go include product managers, leadership and a few software engineers
- Zillow – a real estate tech company, let go 300 employees as per TechCrunch.
These are not small numbers, even if we know the majority of redundancies are usually not software engineers. In fact, they tend to be the minority.
I collated the total number of reported layoffs across tech companies through 2022 to date, using the layoffs tracker site, Layoffs.fyi. In total, 92,558 layoffs have been reported in this database for this year, at the time when this article published. Again, the vast majority of layoffs were not tech roles, nor software engineers. Some of the biggest reported numbers, like Getir laying off ~4,000 couriers, or Booking.com laying off ~2,700 customer services representatives, did not impact tech workers. My estimate is that 10% of the total number were likely tech jobs, so about 10,000 positions made redundant.
The Big Tech Hiring slowdown will be felt far more next year, than the layoffs were in 2022. We know more than 90,000 people could have been laid off in total, based on Layoffs.fyi data. How does this compare to the number of hires Microsoft, Google and Meta made during the past 12 months? I crunched the figures, and here are the results:
These three Big Tech giants alone hired more people – 92,000 – over the past twelve months, than were laid off, as per reports. However, there’s an important difference: Big Tech hires a much higher percentage of tech roles. It’s safe to assume that from these 92,000 hires, about a third to half could be in tech, and around 20% related to software engineering. So, about 18,000 software engineering positions could have been hired by these three Big Tech companies the past year - well outpacing the 10,000 - possibly even less - positions laid off as per the Layoffs.fyi stats.
We can expect all three companies to pull back significantly on hiring. Meta will almost fully stop, Microsoft is holding back until at least the end of the year, and Google is proceeding more cautiously. In their own words:
- Microsoft: “Our sequential headcount growth from Q1 to Q2 will be minimal.”
- Google: “Our Q4 headcount additions will be significantly lower than Q3 (10K people hired in Q3.)”
- Meta: “We expect hiring to slow dramatically and to hold headcount roughly flat next year relative to current levels.”
I can’t help but reflect on the article Layoffs don’t tell the whole story by Lightspeed Ventures partner Nnamdi Iregbulem, in which he made the point that hiring freezes have a wider knock-on effect on the industry, than layoffs do. In September, I wrote:
“What I find more worrying is when Big Tech hits the brakes, and puts hiring freezes in place.”
Well, Big Tech has hit the brakes: hiring freezes are in place and I am, indeed, worried.
Just three Big Tech companies slowing down hiring will have a larger impact on the industry than the 2022 layoffs do. We’ve not even mentioned other large companies like Amazon, which has already frozen hiring, Snap, Netflix, and others which could follow.
What will this Big Tech slowdown mean for the rest of the tech industry? I expect to see a ripple effect throughout the coming year, even if Big Tech reverts to previous hiring patterns later in 2023. Here are a few observations:
AI and ML seems to be the one ‘safe place’ to get hired across Big Tech. The only area that Microsoft, Google and Meta all made clear that they are investing in – meaning, hiring specialists – is AI. This means that AI engineers, ML engineers and data researchers, as well as related positions in AI, will be the best routes into these companies.
So, would it be a strategy to try and specialize in AI, starting now? It’s hard to tell. We are, after all, talking about Big Tech which tends to hire PhD or Masters-level people to new and specialist fields as new grads, and are more likely to hire experienced AI professionals, assuming they can find them. AI is a new field, so I expect all of Big Tech to approach academics and seek to attract people with years of experience in this field to join them.
For software engineers, Google and Microsoft are the most likely places to get hired. Meta seems like the place which will recruit the fewest software engineers. This is because the company has enough and it’s likely to move them around to work on projects such as Reels or Reality Labs, when it needs more. Also, Meta is expecting to be hiring fewer people in total in 2023.
Getting a Big Tech position will become more competitive than in the previous years. An unspoken benefit of working at a well-known company is the pedigree and cache it carries, and how it can make getting future jobs easier. A hiring manager tends to perk up when they see a software engineer with experience at a well-known company like Google or Meta, versus when they worked somewhere less high-profile. Of course, this is a generalization, but it stands that Big Tech experience is valuable not only when looking for the next job, but also if you decide to consult; it can be easier to attract clients and also investors – if you turn into a founder.
Over the past 12 months, Big Tech has likely hired more people than during any previous 12-month period. However, we’ll now see a sharp reduction in hiring. So, what will be the impact?
Well, Big Tech will see just as much and possibly even more applications for fewer positions. This means more competition for each position, and will likely create an even higher hiring bar for these sought-after roles.
New grads and less experienced software engineers will be hit hardest. With Big Tech slowing hiring, there will be a buildup of people who want to get into Big Tech, but will find no openings. The build up of these people is not just less experienced engineers, but also experienced developers. Experienced software engineers who want to move companies will likely choose the next best opportunity, for example at scaleups still recruiting, or more traditional companies which want to become more tech-first.
However, with more experienced engineers going to companies they would not have previously considered, this would start a process in which all companies can hire more senior people than they could when there were no hiring freezes in Big Tech.
Where does it all end?
It becomes much harder for new grads to get their first position. After all, why would any company settle for a new grad when they have the budget to hire someone more experienced, and can do so?
The only places left hiring new grads will likely be companies which pay at the bottom of the market – which cannot afford more experienced people – and those which prioritize hiring new grads, even though they have the budget to recruit more experienced people. Big Tech is in the latter group and will keep running internships and new grad programs, which will most likely be a lot harder to get into.
Despite the market cooling, hiring will feel challenging for most hiring managers. Big Tech won’t be hiring much and compensation packages will stop increasing. This will mean it will be much easier for companies with headcount to fill, to hire, right?
This cooldown is happening in what feels like recessionary conditions. In such uncertain times, more people will stay put where they are, even if it means making a bit less money. Changing jobs is more risky; if the new company does layoffs, new joiners are most likely to be first out.
So, despite the cooling hiring market, it still won’t feel easier to hire. As a side note, a place where you might find it easier to hire software engineers and engineering managers is The Pragmatic Engineer Talent Collective - assuming you have a strong engineering culture in place. Read testimonials of startups successfully hiring and apply here.
This was a bit more than halfway in one out of the five topics covered in this week’s The Scoop. Read the full issue for more of my predictions on what the Big Tech hiring slowdown will mean for career progression, for experienced software engineers, for those working in Big Tech and for hiring managers. The full issue also covers:
- Amazon: a sudden hiring freeze. Starting this week, several units within Amazon have put a temporary hiring freeze in place, expected to last until January 2023, at least. However, some parts of the business are unaffected. I talked with people inside Amazon for a clearer picture on where hiring has been frozen and where not – at least not yet. Exclusive.
- Meta: expect the hiring freeze to stay through 2023. Revenue is down at the social media giant, while the number of employees has risen sharply to 87,314. So, expect very little hiring until the end of next year. Could layoffs be on the table as a way of cutting costs? I share my view. Analysis.
- Google: slowing hiring for the remainder of 2022. The search giant published somewhat disappointing earnings results and confirmed hiring will slow, in general. Still, the company plans to grow certain teams. Which areas are most likely to be hiring? Analysis.
- Microsoft: not hiring because business is good – but not great. Microsoft posted standout results, and is the only Big Tech company which seems to be unaffected by the prospect of recession. So why is the company hitting the brakes on hiring, and which organizations might be exempted? Analysis.
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