> proper explanation (which I didn't find skimming the article) needs to cover why tech is more influenced by that than say travel & leisure sectors.

It's really about the difference between the Risk Free Rate (RFR) and return. Increasing interest rates increases the RFR. A few years ago the RFR was ~0% and even went negative in some places, and now it's ~5%. For an investor to invest in a company the risk premium now has ~5% added. This means even companies like Google, Apple, Meta, etc... must cut costs in order to maintain their current stock price. Since most costs are labor, that's what gets cut.

It impacts startups the same way. Sitting on cash is earning 5% now, so the potential must be that much better to get someone to invest.

The reason tech is more impacted is that the multiples are higher. You can think of a multiple like leverage. Every dollar invested in tech might move 5x-10x more than every dollar in travel. It's great when things are going up, but not great during a correction.

People were saying things like "Why does twitter need 10,000 employees?" for years and years on end.

We are seeing a reversion to the mean.

Turns out it didn‘t. Microsoft is beginning to get the same idea.

The idea that you didn‘t really need a large overhead of management, DEI employees and fairness committees was true all along.

Most large tech companies especially those with entrenched monopolies(FAANGS & Friends) don't need the huge number of workers they've amassed in order to achieve the same product performance and profitability, but they over hired during the years of tech hype and zero interest rates, and now it's difficult to know which people are those pulling most of the weight in the org and which are disposable and just cashing in while only engaging in empire building and theatrics to look busy and important, so the layoffs tend to be more or less random, but it also doesn't affect their profitability even if they let some of the valuable people go through the random layoffs, since like I said, they're entrenched monopolies.

> The idea that you didn‘t really need a large overhead of management, DEI employees and fairness committees was true all along.

Yes, and it's also true that you don't really need two lungs. That doesn't make it a good idea to have one removed.

The metaphor fits best if you make it an appendix. It may or may not provide some unspecified benefits, but there's marginal difference of having it removed. Sometimes it swells to an uncomfortable size, which is when you're best off cutting it out before it kills you.

> a proper explanation (which I didn't find skimming the article) needs to cover why tech is more influenced by that than say travel & leisure sectors.

Sure - the explanation goes like this: in the tech industry, a larger number/proportion of these jobs are in pre-revenue/growth stage companies (as acerbically categorized by OP). The difference between a growth stage company and an established company is that the growth stage one needs more capital to fund its growth. The cost of capital has risen rather dramatically, therefore the total workforce these companies are able to fund has shrunk.

P.S. Love the "slugs through the hourglass" meta tag find!

Three reasons for techmageddon right now. (1) USA had a boomer savings bubble 2010-2022 with boomers in the peak savings years of their lives, resulting in the lowest interest rates in a century, never to return, (2) Covid19 created a work from home and therefore tech bubble, pulling lots of demand forward, (c) IMHO after a decade of lies from FAANGs about how easy it is to get a $200k salary, and how easy it is to sustain these 60hr/wk jobs (impossible; turnover rates are very very high on purpose), all schools are overproducing CS grads. The three of these mistakes have created a perfect storm, worse than the Y2000 bubble ...

Weren't high turnover rates at FAANGs largely due to people job hopping to other FAANGs for even higher salaries?

Being an old-timer in the valley, I was shocked to see the pay-packages from FANGs starting in about 2012 or so when facebook went IPO.

The monopolies and new-age SAAS companies (meta,google,netflix, salesforce, servicenow) went crazy in the comp for sw engineers, and the others had to play catchup. Specifically, the companies used RSUs which could be hidden in non-gaap earnings statements. gaap earnings were ignored in the zero-interest era for high growth sw firms.

The more established (low-growth) firms from a previous era (cisco, ibm, hp) saw the unsustainability of the comp structure, but could not do anything.

If you think IBM or HP responded the way it did because of "sustainability" of accounting, well, I have a bridge to sell you.

> What really needs explaining is why, despite the unusually strong general US job market[1] for several years now, the US tech market specifically has been seeing layoffs and hiring freezes

It's very simple (hyperbole):

When borrowing money costs nothing (interest), who cares if your business makes anything - money or not, just borrow more money at 0% interest to cover your expenses, or get investors to give you their spare money as they're more willing to when they can't get a ROI on 0% interest. All you need to do is convince investors that sales will come later. Startup heavy industries (such as tech) have an easy time getting funds, regardless of whether they have sales.

However, when borrowing money is expensive, businesses that don't have an established market don't do well, as startup funds such as loans are costly, and investors become more picky with their investments since they can get a risk free ROI. Startup heavy industries (such as tech) who don't yet have a positive net income, have a hard time getting funds, and therefore suffer.

This of course applies to all businesses not just startups, it's just more pronounced in startups as they tend to be more reliant on investment.

> When borrowing money costs nothing (interest), who cares if your business makes anything

What? You still need to make a profit in order to pay back loans you know. You just need to make less profit, but you still need profit.

> If you do three years worth of hiring in one single year, eventually you need to pause

Yep, a lot of demand (for tech labor) was pulled forward. The other aspect to consider for the last year or so is that some higher up folks who make decisions to hire people seem to have become convinced that AI is going to (or already is) enable them to get by with fewer engineering heads.

But maximizing shareholder value isn't about "just getting by" it's about optimizing the mix of labor, management and assets to the point that paying to increase any of those variables is break-even. In that case, "AI makes engineers more productive" should lead to more hiring not layoffs.

My suspicion is that the reality is that interest rates are having the intended effect of curbing demand and rather than admit you need to layoff people to match weak demand (and expensive capital), you can tell shareholders a story about AI that doesn't cause them to panic.

> you can tell shareholders a story about AI that doesn't cause them to panic.

Anecdotally I'm hearing that this is the story they're telling inside as a reason they're doing less hiring.

> "AI makes engineers more productive" should lead to more hiring not layoffs.

I'm not sure that follows. If you're a bean counter and you start thinking that maybe you'll be able to cut the engineering budget by 30% ("because AI") then that's going to be very tempting. It's not unlike the offshoring craze that started about 15 years ago. The MBAs then said "Hey, we could pay 1/2 of what we're paying now for the same engineering function" and they started offshoring willy-nilly. Then a year or two later when things weren't working they wondered why, but by then the MBA had moved on to the next company to initiate an offshoring program.

> Anecdotally I'm hearing that this is the story they're telling inside as a reason they're doing less hiring.

Well, you dont tell shareholders something different than what you say internally. That would be _material_.

> EU kind of in a recession though. And there's a well known link between interest rates and unemployment. So it's really not surprising to hear that employment in the EU is harder after the ECB raised rates.

I am fully aware that this may sound emphatically void, but what the devs in the rest of EU are going through right now looks a lot like what the hiring scene was in Finland back in the 1990's and 2000's.

And yes, it is f##king brutal. If the outcomes are anything close, the eventual survivors will be cynical enough to make current HN look like kindergarten full of delusional optimists.

That's why the demoscene was so amazing in Finland... all those unenmployed kids.

How was the hiring scene in Finland back then, and how are they similar?

I'll jot down the highlights (or perhaps lowlights):

To start with, 12-18 months of active search before finding a job was not uncommon. Interview cycles were shorter than the current norm, but you needed personal connections to reliably even land an interview.

Very few companies were actually hiring. They had roles open, but were unwilling to fill them with anyone other than the perfect[tm] candidate. Majority of the jobs were never advertised openly, but got filled based on, you guessed it, personal networks and existing professional relationships.

There were essentially no entry level jobs in technology sector. This feature was amplified by a peculiarity of the Finnish education system: people took longer to get through the uni, but pretty much everyone started working ~full time during their studies. (And how did you find a job as a student? Through personal networks.) As a result, fresh Master's graduates were expected to have 2-3 years of industry experience out of the gate.

Practically all job descriptions had hidden requirements, and as a result, the people who were hired were suitably overqualified.

As a result of all of this, the scene was equally grim for trying to actually hire someone. Open roles either got NO applications, or they were flooded by hopeless hopefuls. The need for personal networks went both ways, and you needed them to find quality candidates at all. I never saw or heard anyone actually pulling the Random Cull ("we do not hire unlucky people"), but I know several who seriously considered doing so at some point.

Ghosting was the norm.

I left the country in 2013, but from what I have heard since, the main changes have been:

    - Ghosting is no longer a standard practice
    - Universities now enforce faster graduations, so the initial career speed boost is gone
    - Hiring cycles are longer, and use more leetcode style hazing
    - There are less hidden requirements, and the job descriptions are actually representative
    - Roles in general have to be posted openly, filling them only through networks is not the norm

Yes, it was brutal.

- Universities now enforce faster graduations, so the initial career speed boost is gone

Today lots of IT university students just drop out after finishing bachelor's degree, or get extended time to finish their degree (you can easily get a couple of years). So, market is still very brutal for fresh grads if they have no working experience.

Can't coomment on other points, since I wasn't in the job market back then. But finding a tech job in Finland sure is much, much harder than two years ago, just like in rest of Europe. Ghosting seems pretty common as well. I'm considering leaving the industry.

tech companies are in a long-term process of moving most roles (not all) to lower-comp

that often means relocating the job or just low-balling people here

there will always be an elite who are very well paid, but we are now seeing the long-term reformat of the rank-and-file

step 1 is to freeze hiring and let attrition move the numbers down...this builds up a body of desperate job-seekers who will work for less

Pretty risky strategy. Tech companies colluded 15 years ago to the point where they got hit with anti-poaching lawsuits. Seems they forgot they did all that and paid so high so other companies don't grab top talent and proceed to become competitors.

It may be too late to compete with FAANG, but the rest of the market will still pay decently to keep and retain talent.

Exactly. It's also an employee refresh. Plus they're pushing down any optional payment like bonuses, RSUs.