Will Mass Layoffs in Tech Continue in 2024? Analysis and Forecast from an Investment Consultant

What is happening in the global economy?

At the beginning of 2023, many experts predicted a tough year for the economy. Central banks worldwide raised interest rates to record highs, and inflation was at its peak. Analysts feared hyperinflation, similar to what occurred in the late 1970s. High-interest rates could have crippled the economy and led to mass bankruptcies.

That did not happen. Inflation in developed countries slowed quickly. In the United States, inflation dropped from 9% to 3.4%. There were bankruptcies, but they were not widespread. Perhaps the most challenging moment was the banking crisis in the U.S. when a Silicon Valley bank became insolvent over the course of just 2 days. The government quickly addressed the situation, however.

At the beginning of this year, the economic situation looks much calmer. The economy held up, and inflation is no longer as alarming. In countries like Turkey and Argentina, inflation is at extreme levels, but these are country-specific issues. The Chinese economy has also recovered, showing a GDP growth of 5.2% in 2023, which is quite good for such a large country.

The main risk for 2024 is geopolitics. In January, two new hotspots emerged — the Middle East and Taiwan. So far, these conflicts have not had a strong impact on the economy. In 2024, elections will take place in many countries, including the presidential election in the U.S. Many experts are concerned about new points of tension.

It is important to understand that there are always problems in the economy and conflicts in politics. Experts will always warn us about risks. Overall, however, 2024 looks more positive than 2023.

What is happening in the global tech industry?

For the tech industry, 2023 was contradictory. From an investor’s point of view, last year was one of the best. In 2023, the NASDAQ index, which mainly includes stocks of technology companies, grew by 53%. This is the fourth-largest result in the 37-year history of the index. Stocks of companies such as Microsoft increased by 65%, META by 170%, and NVIDIA by 219%. Those are significant increases.

If we look at 2023 from the perspective of tech employees, however, the situation is entirely different. The past year set a record for the number of layoffs in the tech sector. In 2022, big tech companies laid off 165,000 employees. In 2023, these same companies reduced their staff by 262,000.

The peak of the layoffs occurred in January 2023, and we still see them continuing. Perhaps tech companies are rushing to terminate employees before annual bonuses are paid. Another possible reason is that in winter, financial statements for the previous year are closed, and budgets for the new year are being finalized. Companies want to write off expenses associated with layoffs in the old year and start the new one with good financial indicators.

Tech companies are entering 2024 with more confidence than they had in 2023. Inflation is lower, many employees have already been laid off, and costs have been reduced. The market situation has become clearer. I am speaking in general terms. In a specific company, in a particular country or industry, there may be unique difficulties. But if we forecast the situation for 2024, I am optimistic

My prediction is that we passed the peak of layoffs in 2023. There might be a spike in January 2024 (and we see some evidence of this). In the following months, however, the situation will improve. Investors do not expect further interest rate hikes from leading central banks. Most likely, we will see a reduction in rates in the second half of this year, which is positive news for all industries, not just tech.

How will AI impact the tech industry?

AI has become the main positive factor not only in the tech industry, but in the global economy more broadly. It is thanks to the hype around AI that the stocks of big tech companies have risen, providing a boost for the entire stock market. Investors expect that, due to AI, many companies will automate their processes and reduce costs. This implies that companies' incomes will grow in the long run. The primary beneficiaries will be those who sell the "picks and shovels," rather than those doing the digging. This is why NVIDIA's stocks surged — they are a recognized leader in producing graphics cards for AI.

On the other hand, concerns are rising that artificial intelligence technologies will lead to massive layoffs. We may already be witnessing these predicted layoffs, and they could increase in 2024. Duolingo, a service for learning foreign languages, recently laid off a significant portion of its content production staff. They will be replaced by AI.

I believe that AI implementation will cause layoffs, but they will be gradual. Initially, terminations will affect those who are easily replaceable, and there are many such employees. These include translators, technical writers, illustrators, and customer support staff. Programmers, engineers, and managers will be affected to a lesser extent.

Should we fear AI? Technological progress always has a positive impact on the economy and our daily lives. Increased labor productivity drives up company stocks as well as wages and our standard of living. Specific individuals may, however, experience frightening and challenging moments.

I view AI as just another technology. When the internet was actively introduced, there were concerns that many people would lose their jobs. This did happen, but the internet also created new job opportunities and opened up new niche areas. I believe the same will happen with AI

The implementation of AI will make production more efficient. This means people will earn more while working less. Thanks to technological progress, people now work significantly less on average than they did 100 years ago.

People will have more time and money, and they will need to spend them somewhere. Look at how the entertainment industry has evolved over the last 50 years. Large sums are invested in it, and interest is growing. That's why the salaries of football stars have skyrocketed.

New niche areas and jobs will emerge in the entertainment industry. Starting a business in that industry will become even easier. Many people are already leaving the tech industry and starting their own businesses online. I did the same, leading investment courses. Many of my former colleagues have become psychologists, numerologists, interior designers, and career consultants. Jobs won't disappear; the field of activity will just change.

What should you do?

Everyone has their own situation, path, and problems. For general recommendations, I suggest the following:

Assess your risk of termination: People usually sense the state of affairs in their company; how likely layoffs and employer bankruptcy are. The situation depends heavily on your experience, skills, and the country's situation.

I remember the 2008 financial crisis; I had just started working in tech at that time. People were basically disappearing from the office every day. Everyone feared being the next to go. I was deeply concerned but eventually gathered the courage to ask my manager directly: "Will I be laid off?" She assured me that with a year of experience, I was not in the risk zone. That reassurance significantly eased my worries, and in the end, I continued working for that company for another 10 years.

Evaluate the financial consequences of termination: Find out how much money people receive as compensation when laid off from your company. Assess your financial safety net and how long your savings will last. If you have no safety net, I recommend starting to build one.

Regarding significant expenses: If you're unsure about your continued employment, it's better to refrain from major purchases and mortgages.

Be open to new opportunities: Keeping your CV up to date is always helpful. Many people now find jobs through LinkedIn. Create a profile and explore how this social network works. It is necessary to be active to get noticed.

Become a media person in your field: There are many bloggers around for a reason. Becoming a YouTube star is extremely difficult, and earning money from videos will be challenging. The benefits of media presence lie elsewhere. You need to acquire new skills and knowledge and become an expert in your field for people to notice you.

I started delving into social media two years ago. I studied the algorithms, and I learned to write articles and format content. I became more confident in public speaking and expanded my network of contacts across different sectors. For content creation, you need to become an expert in your field.

Invest in yourself: If you see that AI may replace you soon, don't waste time. Learn a new field. The global trend now is to change professions very frequently. Doing so has become easier with online learning.

Three years ago, I switched from tech to investments. It was scary and challenging then, and it's still not easy now. The tech industry is facing tough times. But I understand why I'm doing this and where I'm going.

Difficult periods in the economy have always existed and will continue to persist. The economy is cyclical in nature. When we live in "fat years," we don't notice it. It is only in difficult moments that we remember how good it was back in 2019.

Dwelling on the past is not worthwhile; look to the future. Good years will return. But you can't just sit and wait for them; you need to act.