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Job cuts ease at Bay Area tech firms

Silicon Valley’s underlying fundamentals are seen as good by George Avalos The Mercury News (TNS) | July 18, 2023 at 2:07 a.m.

SAN JOSE, Calif. -- There are signs that the wobbly Bay Area tech sector is starting to stabilize after 18 brutal months of job reduction announcements that revealed plans to chop more than 25,000 tech positions in the nine-county region.

Tech companies continue to disclose plans for cuts as the industry proceeds with a restructuring, even as the economic blows wrought by the coronavirus fade and remote work ebbs.

Case in point: At the end of May, Facebook owner Meta Platforms revealed that it would jettison slightly more than 1,100 jobs in Menlo Park, San Francisco, Sunnyvale and Fremont. Other layoffs were announced in June and July.

Yet the job loss numbers from the second quarter, when compared with the first three months of 2023, show an improving trend in the Bay Area, according to a Mercury News analysis of official job elimination notices tech companies have filed with the state Employment Development Department (EDD).

"These numbers confirm what our instincts have been telling us, that Silicon Valley's underlying fundamentals are sound," said Russell Hancock, president of Joint Venture Silicon Valley, a San Jose-based think tank.

For the first time since early 2022, the number of tech company job losses in the Bay Area during the most recent three months is less than the number of such cuts announced in the prior three months, the EDD filings show.

"The Bay Area's tech economy does appear to have settled somewhat," said Jeff Bellisario, executive director of the Bay Area Council Economic Institute. "Fewer [cuts] are likely the result of recovering stock prices, slowing inflation and an overall economic outlook that is more positive than just a few months ago."

Over the second quarter, tech companies filed plans for a total of just over 5,200 job cuts in the Bay Area, according to the WARN layoff notices filed with the state.

The most recent quarter's total represented a drastic slowdown from the nearly 10,200 regional layoffs tech companies disclosed during the first quarter, the EDD filings show.

"Some of our tech companies are sorting out some strategic decisions they made about potential markets that might not be panning out," Hancock said. "Others have gone through a normal process of recalibration coming out of the pandemic."

The second-quarter layoff announcements in the Bay Area were about 48% below the first-quarter totals, the first concrete indicator that the worst of the current batch of tech job cuts has come and gone. This tech trend mirrors an improving situation nationwide, according to information analyzed by Scott Anderson, chief economist with Bank of the West.

Nationwide, "technology job cuts were down 79.5% from a year ago in June," said Anderson, citing information compiled by Challenger, Gray & Christmas, an outplacement and careers consulting firm. "Layoff announcements for the Western U.S. were also down 69.5% from a year ago."

Despite the encouraging signs, more obstacles could emerge for the Bay Area tech sector, and this region's overall job market, partly attributed to the Federal Reserve's quest to corral inflation with steep interest rate increases.

"The headwinds from a restrictive monetary policy from the Fed remain firmly in place," Anderson said. "We still anticipate further deterioration in consumer and business demand in the months ahead that could lead to further weakness in the technology and Bay Area labor market down the road."

Still, the tech job trends in the Bay Area seem brighter for the moment.

Bay Area technology industry job cuts showed hefty increases over four consecutive quarters -- a full one-year period ending in March 2023. Then a sharp improvement began in April 2023.

"The outsized tech [job cuts] in 2022 and the first quarter of 2023 represented an industry reset, driven by several factors, particularly the industry overhiring the previous few years," said Michael Bernick, an employment attorney with law firm Duane Morris and a former director of the EDD. "The reset is not finished, but it has slowed considerably."

An additional encouraging trend has emerged. The shifts in the tech job cut announcements are backed up by official job reports for California and the Bay Area that the state posts monthly.

Over the first four months of 2023, tech companies eliminated a net total of 16,500 jobs in the Bay Area, according to a Beacon Economics compilation of seasonally adjusted totals for all major industries in this region and California that were derived from the EDD official releases.

But in May, tech companies added 2,300 jobs in the Bay Area.

Print Headline: Job cuts ease at Bay Area tech firms


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