How the Pandemic Tech Boom Turned Into a Tech Jobs Bust

In spring 2020, a highly contagious new virus spread across the United States, bringing the country to a standstill. The economy shut down, cities emptied, and millions of white-collar workers began working from home.

As remote work became more popular, platforms such as Zoom, Slack, and Microsoft Teams skyrocketed in use. Distance learning, virtual weddings, app-based grocery delivery, and livestreamed concerts accelerated society’s dependence on digital platforms. The technology sector, already one of the most powerful forces in the U.S. economy, suddenly became the infrastructure supporting nearly every aspect of daily life.

The Pandemic Tech Hiring Boom

Big tech companies launched an unprecedented hiring spree as they scrambled to meet new demand and strengthen their dominance. Tech workers already had tremendous influence in the labor market during the previous decade, but the post-pandemic technology boom tipped the balance even further in their favor.

Demand for technical skills exploded, and technology companies rushed to hire engineers, designers, and data scientists—often without knowing how to use them effectively.

From 2019 to 2022, Amazon and Facebook more than doubled their headcount, increasing by 92% and 93%, respectively. Microsoft added nearly 80,000 employees, while Google hired more than 60,000.

With so many new employees entering the industry, some were assigned to teams without immediate work. Others were placed on hold for future projects that had not yet been planned. In other words, they were hired for nothing.

How Low Interest Rates Fueled Big Tech’s Expansion

The pandemic-era technology jobs boom was fueled by extraordinary fiscal conditions created by more than a decade of easy monetary policy. After the 2008 financial crisis, the Federal Reserve lowered interest rates to near zero to stimulate the economy. For much of the 2010s, rates remained near zero, ushering in what economists call a zero interest rate policy, or ZIRP.

Easy borrowing and cheap venture funding allowed tech companies to expand aggressively. Office workers benefited from higher paychecks, unprecedented job mobility, and greater power to demand more from their employers.

The result was a golden age for technology workers. Many could choose which projects to join, pursue skill development around the clock, and negotiate permanent remote-work arrangements. In this environment, technology workers became valuable assets, courted and catered to in ways rarely seen in other industries.

Rising Interest Rates Ended the Tech Boom

Then, as unprecedented amounts of pandemic-era stimulus money reached consumers, inflation surged and the Federal Reserve responded with one of its most aggressive tightening campaigns in decades. Interest rates rose from near zero to about 5.5%—the bank’s 10th consecutive hike in just 15 months.

As expected, the economy cooled. The S&P 500 fell 19.4%, its biggest decline since 2008, and the slowdown spread across the economy. Real estate activity plummeted as rising mortgage rates discouraged potential homebuyers. Major retail and entertainment companies, including Walt Disney Co., Nike, and Home Depot, were also hurt by weak consumer spending.

Big Tech’s Rapid Rise and Dramatic Fall

More than any other sector, the technology industry— which had soared to unprecedented heights during the pandemic—fell sharply. A dramatic crash followed the industry’s rapid rise and the huge profits generated during the easy-money boom.

Big tech companies began disappointing Wall Street. Amazon reported slowing growth and razor-thin profit margins. Google was hit by a slowdown in digital advertising, with profits declining for four consecutive quarters. Microsoft also faced headwinds as growth in its cloud business, a key driver, began to show signs of slowing.

The exuberance behind the post-pandemic bull market faded, leaving the sector’s inflated valuations exposed. The combined market value of Amazon, Facebook, Apple, Google, and Microsoft fell by about $4 trillion.

Facebook lost two-thirds of its value, Amazon lost half, and Microsoft’s valuation fell by nearly $1 trillion. By the end of the year, the industry was down 30%, making 2022 the third-worst year in its history, behind the 2008 financial crisis and the collapse of the 2000 dot-com bubble.