Tech workers were used to job security, then layoffs burst their bubble

Lisa Mabley was laid off a year ago from her job as a software engineer at a Twin Cities software company. Over the course of five months, she sent her résumé to nearly 300 companies.

She received just two offers at the end.

“The one that I did not accept has [since] had layoffs,” said Mabley, who lives in Minneapolis. “If I had taken the other job, I would perhaps be unemployed again.”

Those months were stressful for Mabley, who was the only person in her household working at times. In September, she began working remotely for a tech startup based in Los Angeles.

“It was super alarming to not have any income coming in,” she said.

Mabley and other tech workers have come face-to-face with an unexpected reality: The industry — that for so long has been filled will promises of unending opportunity — is now oversaturated with candidates.

The environment Mabley found herself in was far different from when she switched careers eight years ago to become an engineer. Then, recruiters solicited her at least once or twice a day.

“I guess I thought I had it made after that point,” Mabley said. “I was like, ‘The demand is so high in the field. I will never have to work hard to find a job again.'”

Companies that rapidly grew their tech talent during the pandemic to help them shift production online — aided by the federal government’s Paycheck Protection Plan that rewarded companies for retaining and adding employees — have terminated workers in large numbers over the past year to reduce operating costs and improve profitability.

Ben Solberg, who lives in Hudson, Wis., was previously vice president of digital marketing and digital product for a large financial services corporation in Minnesota, where he led software product and user-experience teams. His position was eliminated more than two months ago.

Finding employment, even with his résumé, has been a hassle. For the roles he’s applying for, it’s not uncommon to see 3,000 to 5,000 other applications submitted. Given the age of his children, he’d be more inclined to change careers than relocate for a job. That, however, hasn’t be an issue given the wide acceptance of remote work, Solberg said.

The problem is that tech has shifted to an employer’s market, as companies have “an absolute wealth of candidates,” he said, “I have never experienced a market like this in my life.”

Domino effect of layoffs

The current market for tech jobs has seen an unusually high number of layoffs nationwide.

Earlier this month, Tesla, Apple and Amazon Web Services all announced layoffs. Tesla terminated 10% of its workforce, which would affect about 14,000 people. Apple announced it was laying off 600 employees while AWS announced it was cutting hundreds of workers from the cloud-computing business of parent company Amazon.

Among the high-profile local players, Minneapolis-based software company Jamf, which provides Apple device management and security functions to large corporations, in January announced it was cutting its full-time workforce by 6%, affecting nearly 170 employees.

The U.S. tech sector has shed 74,672 jobs in 2024, adding to the more than 260,000 layoffs in 2023, according to Layoffs.fyi.

“With large tech stocks now being rewarded by Wall Street for their cost discipline rather than just growth, others have used this as an opportunity to right size, which has led to a bit of a layoff contagion, as the broader layoff narrative provides cover to any individual company choosing to do the same,” said Jeff Tollefson, president of the Minnesota Technology Association.

In Minnesota, the impact has been a bit more muted. While there has been some downsizing of tech departments at Minnesota companies, it’s mostly shown up as a hiring slowdown. There were 5,483 unique IT job postings by Minnesota companies this past March, compared to 16,000 in May 2022, Tollefson said.

The industry shift has affected sales at Horizonal Talent, a St. Louis Park IT digital and creative staffing company. In the second half of 2022, the company saw client requests plunge by 38%, said Jeremy Langevin, co-founder and chief executive. There was an additional drop of 52% last year, with requests falling below pre-pandemic, early 2020 figures.

Langevin said inflation anxiety and interest rate hikes crept into the minds of decisionmakers, leading to a hiring pullback. Horizonal had two rounds of layoffs itself in 2023.

“I started getting nervous,” Langevin said.

The pullback follows a hiring spree. In 2021, Horizonal Talent had a 78% increase in requests to fill positions, with thousands of people fast-tracked into the interview and hiring process as many companies grew their tech payroll. Meta, the parent company of Facebook, for example, grew its payroll 103% from 2019 to 2022, according to the SEC.

Why the slowdown in Minnesota?

Many companies appear to have misjudged the sustainability of their post-pandemic staffing needs, Langevin said.

The emergence of remote work has also allowed companies to expand their hiring pool nationwide and offshore jobs to people in India, Latin America and parts of Europe. Employers can pay $40,000 to someone in India, where the going rate in the U.S. is $140,000, he said.

Meanwhile, the burgeoning field of artificial intelligence has led companies to discover “they may not need as many software engineers on their teams as previously thought,” Tollefson said.

The reduction of venture capital investing is also dampening hiring, said John Tedesco, founding partner of Arena Partners, a consulting firm for software companies. With less cash being deployed, investors and funds concentrate on fewer companies, usually their high performers. Tech startups with less cash slow down hiring or lay off workers.

Meanwhile, Section 174 of the Tax Cuts and Jobs Act of 2017 removed the option for companies to deduct research and development expenditures. Beginning in 2022, instead of reporting those dollars as an expense so companies like Minneapolis-based software developer Modern Logic can hire a developer to work on a project, all costs related to R&D had to be paid off within five years.

“We got 20 percent to 30 percent more expensive, which makes it very hard for me to justify employing people in the United States,” said Modern Logic CEO Dustin Bruzenak.

An abnormal experience

The current job market has made it difficult for recent college graduates with computer science degrees or those completing coding boot camps, Tollefson said. It’s just as difficult, though, for industry veterans like Susan G. and Abby B., both Twin Cities technologists who were laid off and asked to not have their last names published given their job searches.

Susan works in software product management. Abby is a user-experience researcher. Susan was laid off from a tech startup in L.A. a year ago. Aside from a three-month contract this winter, she’s been unemployed. Abby has been looking for a job the past 10 months.

User-experience researchers, whose jobs are primarily to study the market and determine if there’s a product fit for a software or device, are one of the positions hit the most in this layoff atmosphere, she said.

“It really is [about] who you know,” Susan said. “Referrals are key to even just getting a conversation with a recruiter.”

Abby has seen starting salaries decrease by as much as $30 an hour.

“I totally understand market forces and everything, but my skills have not changed from two years ago,” she said. “I’m still worth the money.”

For years, colleges and career-development institutions encouraged people to earn certificates in software coding, web development or user-experience research. In the current environment, Abby said it’s a waste of money.

“It’s not ethical to recruit people into these boot camps right now,” she said. “I have seven years of experience and I’m having this much trouble finding a job.”