A series of layoffs have hit Utah’s tech community, leaving hundreds of workers without jobs just before the holidays.
The tech layoff tracker layoffs.fyi reports at least 15 Utah companies — 11 in the last three months of the year, or “Q4″ in corporate-speak — have laid off hundreds of employees.
Companies on the list include some so-called unicorns, private companies valued at more than $1 billion, like Pluralsight, Route and Podium.
Since 2018, Utah’s tech sector has grown faster than the national average. So while high interest rates are also fueling cuts at tech companies outside of Utah, a downturn in the tech sector here could have larger repercussions than elsewhere.
Here’s what you need to know about why these Silicon Slope companies are reducing staff and what it means for Utah’s economy:
1. Why are companies cutting staff?
It’s the economy — and some other things.
Sunny Washington, CEO of the advocacy organization Utah Tech Leads, blamed the downturn on inflation and people returning to a pre-coronavirus lifestyle.
She said high interest rates have reduced the incentive for investors to spend money on these companies, at the same time as demand for some of their products has decreased.
“[Companies are] just clamping down, not because they’re not still doing well, it’s just that they can’t anticipate growing at the same speed that they were. And it’s unfortunate that people are a part of this,” Washington said about the layoffs, “especially this time of year.”
(Christopher Cherrington | The Salt Lake Tribune)
Gov. Spencer Cox said at a December media briefing that he knew this sort of market contraction was likely if interest rates increased.
“They’re doing these funding rounds and living off of that,” Cox said, “and that was always going to be a problem as soon as capital got more expensive, which is what happened when interest rates went up.”
Others, like The Atlantic’s Derek Thompson, think the downturn foretells a shift in the tech sector.
He wrote in November that “we are in an intermission between technological epochs,” moving past “the browser era, the social-media era, and the smartphone-app-economy era” to something else, maybe artificial intelligence and augmented reality.
If this is true, Washington said that change would likely create more jobs in Utah — not replace or reduce them.
2. What’s the impact?
This economic downturn means that some companies are cutting staff to balance budgets they’d created while they are still anticipating rapid growth. Going forward, if interest rates remain high, companies will likely grow slower, Washington said.
“It’s still a great time to start a company, but maybe it’s not the best time to raise money for a company,” she said. “It might be a good time to bootstrap and really get to a product market fit before you start really expanding.”
Washington said companies may need to hire smaller teams, cut salaries and focus on creating a company or product that fits the market, instead of concentrating on growth.
“I don’t think by any stretch of the imagination it is the end for this market. I think tech will continue to perform strong in Utah. What is happening is people are a little bit more risk averse. I think they’re being a little bit more conservative in their numbers,” she said, “and that’s being reflected by the hiring practices and the layoffs that they’re doing.”
[Read more: ‘2023 is going to be rough’: What layoffs mean for Utah’s tech industry]
Levi Pace, Kem G. Gardner Policy Institute’s senior research economist, said Utah’s economy “appears to be well positioned if we’re heading for slower growth,” since the state’s unemployment numbers are low and it has fewer network, cyber security and systems engineers than it needs.
Cox said at the news conference that he thinks layoffs will continue into 2023.
3. What is the state doing about it?
State agencies are partnering with the nonprofit Silicon Slopes and other businesses for a “cross pollination” approach to move Utahns who’ve lost their jobs in the tech sector to other available jobs.
Officials said the life sciences and especially the aerospace and defense industries were booming and trying to hire all the staff they can.
“Some of those companies … they could have hired every engineer graduating from every university in Utah, every single one of them every single year, and still not have enough,” Cox said, “so there are going to be places for these tech employees to land.”
The Governor’s Office of Economic Opportunity co-hosted a networking and hiring event Dec. 19 to start “matchmaking” some job seekers with employers, and the Department of Workforce Services is hosting a virtual job fair on Jan. 12.
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