# Shrinking valuations and mounting layoffs have transformed the tech job market

Author:
Kevin Dowd

Published date:
February 13, 2023

As news of layoffs continues to roil the startup sector, Carta data shows that layoffs outpaced voluntary departures for the final two months of 2022.

## A shifting tech job market

In 2021, the market for startup investments [was flying high](https://fund-forecasting@carta.com/data/state-of-private-markets-report-q4-2021/), layoffs were few and far between, and many big tech companies were in the midst [of hiring sprees](https://www.bizjournals.com/bizwomen/news/latest-news/2021/09/amazon-hiring-thousands-corporate-tech-workers.html?page=all). But in 2022, [deal counts were shrinking](https://fund-forecasting@carta.com/data/state-of-private-markets-q3-2022/), valuations were falling, fears of a recession were [mounting](https://www.washingtonpost.com/us-policy/2022/10/20/recession-inflation-white-house-fed/), and [layoffs were on the rise](https://www.marketwatch.com/story/it-was-not-sustainable-or-real-tech-layoffs-approach-great-recession-levels-11669741730)—tech companies [laid off more than 50,000 workers](https://layoffs.fyi/) in November alone. In January 2023, the layoff count [topped 80,000](https://layoffs.fyi/).

In that sort of climate, fewer tech workers are choosing a job change.

“During the Great Resignation, there were candidates that were jumping from job to job because they had the bargaining power,” said Savan Hacknorath, senior vice president of people at Extend, a fintech startup that helps banks and other financial institutions manage virtual card payments for small businesses. “But now, I think that sort of frenzy is over. We’re seeing that thousands of tech workers have been laid off. And so we’re entering this period of great uncertainty.”

This shift is in line with historical norms in the broader economy. Over the past 20 years, worker quit rates [have increased gradually](https://www.bls.gov/opub/mlr/2022/article/the-great-resignation-in-perspective.htm) during periods of economic expansion and decreased sharply during downturns, according to data from the U.S. Bureau of Labor Statistics.

But this year’s shift in the tech job market has been much more abrupt than in the economy at large. While optional job departures on Carta are down 46% since May, the economy-wide quit rate has only dipped from 2.8% to 2.7% over that span, per [the Bureau of Labor Statistics](https://www.epi.org/indicators/jolts/). And while layoffs have spiked among the tech companies on Carta, the economy-wide layoff rate only rose from 0.9% to 1% over the course of 2022.

## Layoffs overtake voluntary departures

Since the start of 2019, the rate of employees tracked on Carta leaving a job by choice has almost always been substantially higher than the rate of workers being fired or laid off. The lone exception was April 2020, immediately after the onset of the pandemic, when the U.S. economy lost more jobs than [in any single month since the Great Depression](https://www.cnn.com/2020/05/08/economy/april-jobs-report-2020-coronavirus/index.html).

But this trend, too, has shifted. It peaked in July 2021, when 87% of job departures on Carta were by choice and 13% were layoffs or firings. That gap shrunk over the next several months. Now, it’s vanished entirely: Involuntary exits made up 51.4% of all departures in November 2022, surpassing the frequency of voluntary exits for the first time since the onset of the pandemic.

## What comes next?

The number of layoffs ticked down slightly during the holiday month of December. But news of job cuts at massive tech companies has continued in 2023. Salesforce [announced thousands of layoffs](https://www.nytimes.com/2023/01/04/technology/salesforce-layoffs.html), Microsoft revealed plans [for some 10,000 cuts](https://www.cnn.com/2023/01/18/tech/microsoft-layoffs/index.html), and Amazon decided to let go of [thousands more workers than initially planned](https://www.wsj.com/articles/amazon-to-lay-off-over-17-000-workers-more-than-first-planned-11672874304). Overall, more than 250 tech companies have already [laid off workers this year](https://layoffs.fyi/). Some think layoffs in the tech sector [will get worse](https://fortune.com/2022/12/07/how-bad-tech-layoffs-recession-jefferies-google-meta-amazon-buckle-up/).

On the other hand, there’s some reason to think that fears of economic upheaval have already peaked. Interest rates are still on the rise, but the Federal Reserve [has started reducing the size](https://www.cnbc.com/2022/12/14/heres-what-the-federal-reserves-half-point-rate-hike-means-for-you.html) of its recent hikes. Inflation [is slowing](https://www.wsj.com/articles/us-inflation-december-2022-consumer-price-index-11673485441). Goldman Sachs recently pegged the odds of a recession in the next 12 months [at just 25%](https://www.bloomberg.com/news/articles/2023-02-06/goldman-cuts-us-recession-odds-to-25-on-jobs-business-outlook). And the broader job market remains tight: In January, U.S. employers [added 517,000 jobs](https://www.wsj.com/articles/january-jobs-report-unemployment-rate-economy-growth-2023-11675374490) and the national unemployment rate fell to 3.5%, reaching [its lowest point since the 1960s](https://www.cnbc.com/2023/02/03/jobs-report-january-2023-.html).

But for now, at least, workers are still leery about layoffs. As long as those fears persist, the rate of job-hopping should continue to shrink.

## Author: [Kevin Dowd](https://fund-forecasting@carta.com/author/kevin-dowd/)

Kevin Dowd is a senior writer covering the private markets. Prior to joining Carta, he reported on venture capital and private equity at Forbes, where he wrote the Deal Flow newsletter, and at PitchBook, where he wrote The Weekend Pitch.