Why Bay Area Tech Cuts Still Aren’t Recession Fears

It seems like every few weeks there is news about Silicon Valley tech workers being hit with wave after wave of mass layoffs. So why doesn’t the Bay Area seem to be in recession? After all, it’s as hard as ever to buy a house in San Francisco, and the region is still the center of the state’s economy.

Earlier this month, Oracle cut more than 500 jobs in the Bay Area as part of a wider workforce reduction amounting to approx 30,000 workers worldwide. In July, Metta will start cutting 3000 workers in Menlo Park, Sunnyvale, Burlingame, San Francisco and Fremont. LinkedIn will also cut back more than 500 jobs in Sunnyvale, where it is headquartered, as well as in San Francisco and Mountain View. Last October, Cisco cut more than 200 jobs in the Bay Area, and in May, the San Jose-based company began cutting about 4,000 additional jobs globally. despite posting record profits.

But that’s actually a slower pace of cuts than 2022, said Sarah Bohn, vice president and director of the Public Policy Institute of California’s Center for Economic Policy. She said the Bay Area economy has remained stagnant in terms of employment and job growth for the past year or so. While that sounds inconclusive, it’s a relatively promising sign that the industry has moved on from post-pandemic layoffs.

The tech industry’s unemployment rate also remains the lowest in the broader economy, and those who are laid off in the sector often find other work “in fairly quick succession,” Bohn said.

• Bonn: “The layoff announcements are staggering, and it looks like a lot of people are affected, but we’re talking about a really big sector… If you’re laid off or things change at your tech company, there are still other opportunities in the California economy for a lot of those people.”

Jeff Bellisario, executive director of the Bay Area Council’s Economic Institute, also told me that generous severance packages from tech companies and investments in the performing stock market give laid-off workers more of a buffer and disposable income, respectively, while they look for new jobs.

But that doesn’t mean things will always be stable: If major layoffs continue, we could eventually see a significant decline in the Bay Area’s labor market, Bohn said.

Finding new work has also become more difficult in certain technology sectors, now that the industry is “growing through other means that are not tied to human capital,” Bellisario said, such as data centers and artificial intelligence.

• Bellisario: “Tech workers have opportunities. But now that the job market is more challenging, it’s not the frothy tech job market we had just a few years ago.”