Introduction
As you might have heard, recently there has been a huge influx of layoffs and most of these layoffs have been focused on the tech industry. 93,000 jobs so far is the current count for how many people have been laid off in tech. Google cut 12,000 jobs, Amazon 18,000 jobs, Salesforce 7,000 jobs, Facebook 11,000 jobs, Twitter, 3,700 jobs, and Tesla 6,000 jobs. A lot has happened in recent years that lead up to this point but it all started with the pandemic.
How We Got Here
The COVID-19 pandemic has had a significant impact on many aspects of our lives, including the economy and job market. One industry that has been particularly impacted is the tech industry. The pandemic led to a shift in consumer behavior, with many people staying at home and spending more time online. This has created new opportunities for tech companies in areas such as e-commerce, online education, and telemedicine.
In combination with the massive amount of stimulus that was handed out during the lockdowns to help prop up the economy, many tech companies saw their profits soar and they were unable to keep up with demand unless they hired on more staff. Salaries saw sharp increases as competition for skilled tech workers got heated between the top tech companies.
Markets were supercharged by the amount of money the government was spending on stimulus, and companies were unable to meet demand with the widespread supply chain issues so prices increased across the board and this is when we began to see inflation rear its head.
As inflation started to skyrocket, the Federal Reserve felt the economy needed to dial down so that prices can go back to a normal level. One way to do this and the way that the Federal Reserve has always done this before in the past is to increase interest rates to decrease borrowing to slow down the economy.
And as the interest rates continually increased the consumer uncertainty also increased causing businesses to be less willing to hire and take risks until they felt markets were stable again. This then leads to a correction for many tech companies that overhired during the pandemic. Many companies were forced to cut their labor forces to reduce cost and maintain profitability.
As scary as this all sounds, this has happened many times before in the past and I can confidently say it will happen again and again in the future. Maybe not as exact of a scenario as the one we are experiencing right now but there will always be market downturns and sometimes they will even hit your specific industry the hardest.
Market Crashes of the Past
Stock Market Crash of the 70s
The stock market crash of the 70s from 1973 to 1974 was a significant event that had lasting impact for the global economy. Out of the different events we will be discussing today this one probably has the most similarities to what we are experiencing currently.
One similarity is the presence of inflation. In the 1970s, the United States experienced high levels of inflation, driven in part by the oil crisis and other economic factors. Today, inflation is again a concern, as the COVID-19 pandemic has led to supply chain disruptions and other factors that have driven up prices.
The 70s also saw significant geopolitical tensions that impacted the global economy, including the Cold War and other conflicts. Today, tensions between major powers such as the US, China, and Russia are once again a concern, and their impact on the global economy remains uncertain.
Due to all these factors the stock market saw a loss of 43%, nearly half of its total value and the recovery was not a great one as well. The recovery was slow and the US did not see the same level in real terms for over 20 years.
Dot Com Bubble of the 2000s
The next notable market crash in our recent collective memory is the dot com bubble of the 2000s. While the current economic conditions are different from those of the dot com era, there are still several ways in which the crash continues to affect the tech industry today.
One of the most significant impacts of the dot com crash was the shift in investor sentiment. During the dot com era, many investors were drawn to tech companies with little or no revenue, in the hope of making a quick profit. When the crash occurred, many of these investors lost significant amounts of money, and the tech industry lost a lot of credibility in the eyes of the broader investment community. As a result, many tech companies today face greater scrutiny and are held to higher standards than in the past.
Another impact of the dot com crash was the significant drop in enrollment of computer related degrees. Confidence in the security of acquiring a tech job and living a comfortable life waned as people saw the consequences of the reckless actions taken by some of these dot com companies. 52% of dot com companies did not survive to 2004 so if you were living through this period of economic turmoil it was not unreasonable to want to choose a different career path.
Housing Market Crash of 2008
Finally, the most catastrophic economic event in recent years is the housing market crash of 2008. One of the most immediate impacts of the housing market crash was the wave of foreclosures that swept the country. As many homeowners found themselves unable to keep up with their mortgage payments, banks began to foreclose on their homes and sell them at reduced prices. This flood of foreclosures onto the market led to a sharp decline in home prices, which in turn made it even more difficult for homeowners to keep up with their mortgage payments. The result was a vicious cycle that saw more and more homes foreclosed on and sold at reduced prices.
The plummeting home prices led to a decline in consumer spending, as homeowners cut back on spending as homeowners found themselves owing more on their mortgages than their homes were worth. The damage would then spread to the financial sector as many banks and other financial institutions had invested heavily in the housing market, and when the crash occurred, many of these institutions faced significant losses. This led to a wave of bank failures and government bailouts, as policymakers sought to stabilize the financial sector and prevent a broader economic collapse.
From the market crash of the 70s to the dot com bubble to the housing market crash all these were disastrous events that destroyed the lives of millions of people and have had a lasting impact on the economy. So what do they all have in common? We recovered from every single event better and stronger than before.
How We Navigate Through Tough Times
In times of economic uncertainty, it can be challenging to stay optimistic and motivated. When the economy is struggling, it can be difficult to find employment, keep your current job, and pay bills. However, it’s important to remember that no one knows exactly what the future holds so keep a long-term perspective and remain focused on your goals.
When times are tough, it can be tempting to make short-term decisions based on immediate concerns but don’t be short sighted and look at the big picture. What do you want to achieve in your career or personal life? How can you use this time to work towards those goals? How you navigate difficult times will define who you are and what your future looks like.
Companies like Amazon, Ebay, and Adobe were able to survive and thrive after weathering the economic storm of the dot-com bubble crash. And companies like Google, Apple and Facebook started shortly after the bubble burst and are now some of the most successful companies in the world. The resilience of these companies demonstrates that success is still possible even during times of economic turmoil.
Even in an event as catastrophic as the housing market crash, the housing market has recovered after the crash of 2008 and has even soared to new heights. These rebounds are a testament to the resilience of the broader economy as a whole so it’s important to remember that no matter how bad things seem in the short term, there is always a chance for recovery and growth. Do not be afraid to achieve your goals because of short-term turmoils.
Why Choose a Tech Career During a Tech Layoff?
Let me be a little more specific and share my own story. A few years ago during the pandemic I was living at home with no job, no money, and no degree. It would have been very easy for me to just say, “It is too rough out there right now. Maybe I should wait out the storm and start trying at a later time.” But I decided that during times when people are most fearful is the most important time for me to be brave. And so I decided to get a job regardless of what was happening on the news and around me and it was the best decision I had ever made.
I hated the job that I got but because I hated that job it pushed me to try and pursue a career in something I enjoyed which led me to IT. If you are out there interested in IT and see all these tech layoffs and are scared to get into tech. Let me tell you this, the tech industry is not going anywhere, and you did not choose a bad career path. The investment you make today will pay dividends tomorrow and there is no better investment than in yourself.
So keep studying and keep working towards your goals because the skills you learn today will carry you for the rest of your life. Even if it means taking a different path or making adjustments along the way. It’s also worth noting that the tech industry has shown remarkable resilience during economic downturns. So if you are truly passionate about tech then focus on building skills and staying relevant.
During difficult times, it can be challenging to find work, so focus on building your skills and staying current with industry trends. Take an online course, start a bootcamp, do as many home labs and projects as you can, do whatever you can to sharpen your skills and stay relevant. I can not tell you how long these tough times will last but I can say with confidence that hard work and talent can not be denied for long and eventually the cream will rise to the top.
“Don’t be pushed around by the fears in your mind. Be led by the dreams in your heart.”
-Roy T. Bennett