In the spring of 2020, as a new and highly contagious virus spread throughout the country, the US came to a standstill. The economy shut down, cities emptied, and white-collar workers were sent home en masse. Platforms like Zoom, Slack, and Microsoft Teams surged in usage as WFH became ubiquitous. From remote schooling and virtual weddings to app-based grocery delivery and livestreamed concerts, the pandemic accelerated and cemented society’s increasing reliance on digital platforms. Already one of the most powerful forces in the American economy, the tech sector suddenly became the infrastructure underpinning every aspect of life.
Tech giants went on an unprecedented hiring spree, scrambling to meet new demand and cement their dominance. Where tech workers already had tremendous labor market power in the preceding decade, the postpandemic boom for technology tilted the balance even more sharply in favor of workers. Demand for technical skills exploded, and tech companies scrambled to recruit engineers, designers, and data scientists, often without fully knowing what to do with them.
Between 2019 and 2022, Amazon and Facebook more than doubled their head count, growing by 92 percent and 93 percent, respectively. Microsoft added nearly 80,000 new employees, while Google brought on over 60,000. With so many workers joining the industry, many were onboarded to teams with no immediate tasks, held in reserve for future projects that hadn’t yet been planned—they were, in other words, hired with nothing to do.
Tech’s pandemic-era hiring boom was underwritten by an extraordinary financial backdrop shaped by over a decade of loose monetary policy. In the wake of the 2008 financial crisis, the Federal Reserve slashed interest rates to near zero to stimulate the economy. And for most of the 2010s, rates remained near zero, creating what economists call an era of zero interest rate policy, or ZIRP.
With money easy to borrow and venture funds flush with cheap capital, tech firms expanded aggressively, and office workers reaped the rewards: skyrocketing salaries, unprecedented job mobility, and the leverage to demand more from their employers. The result was a golden age for tech workers. Many could choose which projects to join, pursue skill development on the clock, or even negotiate permanent remote work arrangements. In this environment, tech workers were prized assets, courted and catered to in ways rarely seen in other industries.
Then inflation hit as an unprecedented flood of pandemic-era stimulus cash went into the hands of consumers, and the Fed responded with one of the most aggressive tightening campaigns in decades. Rates were raised from near zero to roughly 5.5 percent, with the bank making 10 consecutive hikes in just 15 months. As intended, the economy turned cold. The S&P 500 fell 19.4 percent, the largest drop since 2008. Sectors across the board felt the slowdown. Real estate activity plummeted as higher mortgage rates discouraged potential homebuyers. Top retail and entertainment firms, from Walt Disney to Nike to Home Depot, were similarly hit as consumer spending drew back.
But more than any other sector, the tech industry, which had soared to unprecedented heights during the pandemic, fell the hardest. Having experienced outsize gains during the easy-money boom years, tech’s rapid ascent was followed by an equally dramatic crash.
Major tech firms began missing Wall Street’s expectations. Amazon reported sluggish growth and razor-thin margins. Google saw four consecutive quarterly declines in profit, hit hard by a slowdown in digital ad spending. Microsoft also faced headwinds, with its cloud business, its key growth driver, showing signs of deceleration. The exuberance that had fueled the postpandemic rally evaporated, and the air came rushing out of the sector’s inflated valuations. Almost $4 trillion in combined market value vanished from Amazon, Facebook, Apple, Google, and Microsoft. Facebook lost two-thirds of its value. Amazon lost half. And nearly $1 trillion was shaved off Microsoft’s valuation. At year’s end, the industry fell 30 percent, making 2022 the third-worst year in the industry’s history, after the 2008 financial crisis and the bursting of the dot-com bubble in 2000.
