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The reason behind massive layoffs in the tech sector in 2024

Tencent's Riot Games (TCEHY, 0700.HK) announced it will lay off 11% of its staff, about 530 employees. The company joins a list of tech companies that have announced layoffs, bringing the total number to just short of 11,000 in 2024, according to Layoffs.fyi.

Layoffs.fyi Creator Roger Lee joins Yahoo Finance to give insight into the recent round of layoffs in the tech sector and what it could mean for the broader labor market.

"A lot of the recent layoffs are still about tech companies trying to overcorrect for their overhiring during the pandemic," Lee says. "Given that the high interest rate environment and the tech downturn have both lasted longer than initially expected, companies like Amazon (AMZN) and Google (GOOG, GOOGL) are finding that maybe they didn't cut enough people in last year's large rounds of layoffs so they're going back to the well and continuing to implement smaller, targeted additional layoffs."

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

[AUDIO LOGO]

RACHELLE AKUFFO: Tencent's Riot Games is the latest tech company to announce layoffs. The gaming company saying it will cut 11% of its staff or about 530 jobs as it scales back the division that publishes games from small developers. Now, this move is bringing the total number of employees laid off in 2024 to nearly 11,000, that's according to layoffs.fyi. Joining us now is Roger Lee, the creator of layoffs.fyi. So Roger, give us a sense of this because where are we comparatively to 2019 in terms of the hiring and laying-off cycle?

ROGER LEE: So it's been a bad recent few months for tech layoffs. Already this year, we're over 10,000 tech employees cut. And that follows a brutal 2023 where over 260,000 employees got cut in the tech sector, which is the largest year since COVID began in 2020.

AKIKO FUJITA: Roger, though how much of this is about a correction that we're seeing within these companies? I mean, when you think about the big tech names that have announced layoffs, so much of that has been followed by the fact that they overhired at the height of the pandemic. How much of what we've seen--

ROGER LEE: Yeah.

AKIKO FUJITA: --so far this year can be attributed to that? How much of it is about a broader slowdown that some of these companies are seeing?

ROGER LEE: So a lot of the recent layoffs are still about tech companies trying to overcorrect for their overall hiring during the pandemic. Given that the high-interest rate environment and the tech downturn have both lasted longer than initially expected, companies like Amazon and Google are finding that maybe they didn't cut enough people in last year's large rounds of layoffs. So they're going back to the well and continuing to implement smaller, targeted additional layoffs.

RACHELLE AKUFFO: And, of course, we have to talk about the impact of AI. Of course, any time there's talk about it, you have people shaking their fist at AI, thinking it's going to take their jobs. Obviously, haven't seen that playing out at the moment, but how is that affecting sort of the layoffs and the rehiring that we're seeing of some of this tech talent?

ROGER LEE: Yeah, even though most of the tech companies are laying off because of broader economic concerns, an increasing number of companies have been citing AI as a reason for layoffs. For example, companies like Dropbox and Meta are both shifting their resources to focus more on AI talent even as they eliminate jobs elsewhere in their organization.

AKIKO FUJITA: So what are some of those jobs that are most in demand given the build-out that a lot of these companies are doing on AI?

ROGER LEE: Well, no surprise, it's everything related to AI engineering. And you're seeing this in tech salary trends as well. You know, according to salary data from comprehensive.io, tech salaries have largely stagnated over the past two years.

And that's no surprise given that all these layoffs mean that the job market no longer favors employees as much as it once had during the boom times. But that said, AI engineering stands out as the lone exception where salaries in AI have risen by 12% in a single quarter alone and have now crossed $200,000 on average for a senior engineer in AI. And that's just cash, you know, including stock, those compensation packages can be upwards of $1 million.

RACHELLE AKUFFO: And so with that in mind then, Roger, how much of the-- is there a skills gap versus the demand that we're seeing? I mean, how many of these require you know a bachelor's degree or something more advanced versus some of this training that people can do to try and really try and snap up some of these jobs?

ROGER LEE: Well, the most in-demand roles in AI certainly require a lot of experience and knowledge. So that does have a larger barrier to entry to be able to qualify for some of those most senior, highest-paying engineering roles. But the good news is that AI is still kind of in its infancy in terms of its long-term potential. So that means it's not too late for folks to be able to get up to speed on how to use AI, how to build for AI. And because with tools like ChatGPT, AI is so accessible, it's fairly easy for even the average person to start playing around with AI and to start figuring out how they can use AI to be productive at their own jobs.

AKIKO FUJITA: Yeah, Roger, I don't know, that mention of a $1 million compensation package is going to get a lot of people thinking about getting into AI. Roger Lee, the creator of layoffs.fyi, it's good to talk to you today. Thanks so much for stopping by.

ROGER LEE: Thank you for having me.

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