By July 2022, layoffs were happening across the technology industry at a pace that had stopped being individually newsworthy. Coinbase had cut roughly eighteen percent of its workforce in June. Tesla had announced cuts. Netflix had eliminated several hundred positions. Smaller companies were following suit. Meta had not yet done its larger reductions but had paused hiring. The cycle had visibly turned, and the question had moved from whether it would reach a particular company to when.
The mechanics were straightforward enough. The previous two years had been a period of unusually aggressive hiring across the industry. Pandemic conditions had pulled forward demand for many categories of digital service. Public market valuations had been high. Capital had been cheap. Companies had hired aggressively to capture what they expected to be sustained growth.
The growth had not been sustained at the rates that had justified the hiring. Public market valuations had fallen significantly during the first half of 2022. Interest rates had risen. The cost of capital had increased. The forecasts that had justified rapid headcount growth had been revised downward. The reductions were the inevitable consequence of the inputs that had changed.
What was harder to discuss but was the more interesting question was about the structure that had been built up during the boom. Many companies had hired faster than they could effectively integrate the new employees. The actual productivity per engineer had not necessarily increased in proportion to the headcount. The reductions, painful as they were for the people affected, were partially a recognition that the additional people had not produced proportional additional output.
The other observation was about who got cut first. Across many companies, the patterns were uneven in ways that revealed strategic priorities. Recruiting teams were heavily reduced because the companies were no longer hiring at the previous pace. New product divisions whose results had not materialised were trimmed. Engineering teams on core products were generally protected. Support and administrative functions took disproportionate cuts.
What the layoffs did not yet do, in mid-2022, was reach the scale they would reach by late 2022 and early 2023. The bigger announcements from Meta, Amazon, Microsoft, and Google were still ahead. The 2022 reductions were the start of a multi-quarter recalibration that would continue well into the following year.