Tech layoffs surge—again—but mainstream businesses are hiring techies

This year is shaping up to be worse for tech layoffs than last year, as tech companies have already shed more workers in 2023 so far than in all of 2022, according to a report released Thursday.

However, tech workers are finding jobs in the mainstream economy, including aerospace/defense, business consulting, and finance/banking. According to recruiters, tech jobs are moving geographically, from tech hubs in California and the U.S. Northeast to the American heartland.

Technology companies announced 102,391 cuts in the first quarter of 2023, compared with just 267 layoffs in the first quarter of 2022. Total layoffs are already 5% higher than last year's annual total of 97,171, according to a report from outplacement firm Challenger, Gray & Christmas, Inc.  

Tech is on pace this year to surpass the highest annual total layoffs since 2001, the report says.

And while the U.S. overall is seeing massive layoffs, the tech industry leads. In fact, employers announced 270,416 job cuts for the first quarter, the outplacement firm said.

However, mainstream companies are hiring tech workers, recruiters said. That includes all industries, with aerospace/defense, business consulting, finance/banking and healthcare leading demand, said Art Zeile, CEO of DHI Group, parent of the tech recruiter sites Dice and ClearanceJobs.

Increased U.S. defense spending fueled demand for tech talent in aerospace and defense. “Aerospace and defense companies are hiring as fast as they can to staff up projects. Itʼs completely immune to whatʼs happening inside the larger economy,” Zeile said.

Increased hiring in business consulting is a function of layoffs across the economy, Zeile said. As companies tighten their belts in the face of economic uncertainty, a first step is to outsource IT projects, leading to increased demand for staffing from employers including Deloitte, Accenture and McKinsey. Indeed, Accenture has the largest number of tech openings advertised on Dice of any company over the past year.

As for finance/banking and healthcare, those companies are more recession-resistant than other industries. Finance and banking are seeing continued demand for digital transformation, as millennials and Generation Z demand mobile and other online banking rather than going into bank branches to do business.

Likewise, while healthcare has always been a laggard in tech, even that industry is seeing more demand for tech workers. “They recognize they have to deliver a better customer experience than sitting in your doctorʼs office waiting room filling out 30 pages of paperwork,” Zeile said.

ZipRecruiter agreed that tech jobs are in demand across all industries, with strong demand in energy, education, leisure/hospitality, and government. These companies previously found it hard to compete for talent with tech companies, which offered big paychecks and flexible work arrangements. Now that demand from tech companies has slacked, non-tech companies are snapping workers up, said ZipRecruiter Lead Economist Sinem Buber.

Geographic migration

The last two years have seen a geographic migration of tech jobs, which are leaving Seattle, San Francisco, and Los Angeles and headed to Phoenix, Austin, Charlotte, Nashville and Miami, Zeile said.

The geographic trend also sees jobs leaving New York and Washington D.C., though the migration is less pronounced for those locations, Zeile said.

“People are seeking better cost of living and quality of life compared with what they had on the West Coast,” Zeile said. “Silicon Valley is a difficult place to live, and people are fed up with two-hour commutes each way.”

Also, tech jobs are more open to remote work, with a 20-year history of companies managing distributed and offshored tech teams. “So thereʼs an ease in working across geographies that I donʼt think is prevalent with other industries or job function areas.”

Top skills

The top skills in demand for tech workers are data science and artificial intelligence, Zeile said. That demand precedes the generative AI boom that began late last year—but Dice and ZipRecruiter have recently seen demand for ChatGPT “prompt engineers.”

The unemployment rate in data science is essentially zero. Companies looking to recruit data science jobs canʼt wait for resumes to come in; they have to recruit from people who already have jobs, Zeile said.

The second-most in-demand skills are related to cybersecurity. And the third is anything related to migrating to the cloud. Even after years of migration, only 40% of IT workloads are in the cloud, so thereʼs plenty of demand for cloud migration skills, Zeile said.

Soft skills are also important, including communication and presentation with non-technical stakeholders and end-users, Buber said.

Salary growth

Salaries are still growing for tech, although that growth is slowing. Salary growth for tech jobs in 2022 was 3%, which is typical for annual increases over the last two decades, compared with 6.9% in the previous year, Zeile said. However, salaries for skills in high demand — data science, cybersecurity and cloud — saw much larger increases year over year.

Only 10% of job-seekers had to take pay cuts, Buber said. About half of job-seekers got a job that pays better than their previous job, and about 40% got a job that paid about the same.

Making the culture shift

Culture shift is proving to be more of a big deal for mainstream companies than for tech workers.

“The biggest issue with more established industries is that companies have to understand that there is a certain culture that succeeds for the technology community,” Zeile said. “You canʼt ask people to wear a suit to work or mandate a certain number of days in the office. You have to be much more flexible.”

Tech workers seek jobs at companies with a culture and missions they respect. They are not just moving for the bigger paycheck. Theyʼre looking to get out of the get-rich-quick Silicon Valley mentality, with job-hopping every year, and instead find stable jobs for long-term security. They want opportunities to work on the latest technologies and solve interesting problems, Zeile said.

“Workers prioritize job security over flexible work arrangements when choosing their next job,” Buber said. “When we ask them what are the top three things they want in their next job, the first is always being able to provide for the family financially. Paycheck comes first. After that, flexible work arrangements, not having a stressful job, work-life balance, and learning opportunities.” Changing technology worker priorities are making recruiting efforts easier for non-traditional tech companies, Buber said.

But tech workers have to make changes, too, Zeile said. Mainstream businesses have more structure, more rules, and more hierarchy than the tech industry. Tech companies have flat hierarchies and more reliance on autonomous teams.

Interestingly, while tech companies have made headlines in the past for enticing workers with lavish perks like chefs and personal trainers, tech workers donʼt really care about those things, Buber said. According to surveys, tech workers are practical: they value flexibility, medical benefits, and skills development.

And tech companies are going easy on the perks. For example, Google just announced theyʼre laying off massage therapists and restricting free food, Zeile noted. The company is even restricting office equipment, like staplers.