For some Bay Area companies, 2022 was punctuated by layoffs, falling stock prices, concerned shareholders and cost cutting.
Close to 1,000 companies cut more than 152,000 jobs globally this year, according to the website Layoffs.fyi, with nearly one-third of those jobs connected in some way to Bay Area companies. The layoffs means thousands of highly skilled workers have returned to a labor market that has been notoriously competitive for the past decade.
That raises the question: Do startups with fresh funding that have traditionally struggled to attract top tier talent against FAANG companies now have an advantage? It may be too early to tell how things will shake out, but experts tell me the competition is still fierce.
For startups actively hiring, one of the biggest challenges remains the cost of labor, Array VC partner Shruti Van Dyke Gandhi told me.
"Everything is fluid right now, but good talent in certain fields like AI, machine learning, computer vision and deep tech is still expensive and unaffordable for startups," Gandhi said. Startups are hiring but "it's all up in the air and there's very little clarity in the market."
Big Tech might have lost some of its luster this year, but that hasn't opened up a pool of talent yet, according to Katherine Lehman, the director of digital marketing for Onfleet, a San Francisco-based logistics startup that manages last-mile deliveries. She recently hired for two positions, but one for recently opening only 17% of the applicants were qualified.
"We haven't really benefited from that flood of talent because there's a lot of competition," she told me. “You're also fighting against the perception that startups are unstable, that a billionaire could buy your company and lay off half the company."
Low unemployment and a looming recession are also contributing to a tight labor market in the Bay Area.
In March, the unemployment rate in the San Francisco-Oakland-Hayward metropolitan area was 2.9%, the first time it dropped below 3% since February 2020, according to federal labor data. It was as low as 2.2% in May, and preliminary estimates show that it rose slightly to 2.6% in October before the mass layoffs at Twitter and Meta were announced.
However, there has also been a "substantial" decline in hiring nationally, according to LinkedIn's December report on workforce trends that looks at data from November. On average, hiring dropped more than 20% compared to the same period in 2021. In the Bay Area, hiring dropped even more at around 30%.
LinkedIn's workforce reports don't break out industry-specific hiring trends by region, but the technology sector overall had the sharpest consecutive monthly drop at 14.6% in November. And compared with the same period in 2021, it dropped 39%, second only to the 44% decline at "holding companies."
Hiring managers are also spending more time on selecting and assessing job candidates, Crosschq founder and CEO Mike Fitzsimmons told me. The Danville startup provides hiring and job search services to both employers and workers.
This year, requests to fill open roles on its platform peaked in the first quarter and then dropped 40% from April through June. From July through September, requests ticked back up 10%.
"It was worse in the thick of the summer. There was a low point in July and a high point in November," Fitzsimmons said.
But Crosschq says it is expecting hiring to decline again by 12-15% in the first three months of 2023.
Close to half of all workers in the U.S. are expected to look for new jobs in 2023 despite broad uncertainty, according to the job search and recruiting firm Robert Half.
"Noise around hiring freezes and layoffs at some companies hasn't seemed to faze workers — many are just as confident in their job prospects as they were six months ago," Paul McDonald, a senior executive director at Robert Half, said in a statement. "The labor market remains tight, and professionals are curious about exploring new and more fulfilling career paths."
S.F.-based Hint Health changed its recruiting practices this year after dealing with more applicants than it could handle.
The startup had 750 applicants for a single role after they were mentioned in a TikTok video promoting companies that were hiring, Head of Operations Aimee Leidich told me. Another job opening garnered 200 applications.
"We don't post anymore," Leidich said.
Instead, Hint Health recruits people directly. That also puts a strain on hiring managers but the company seems to think it's a better strategy overall right now.
By searching from a smaller pool of candidates, Hint Health is able to find higher quality candidates, Leidich said.
S.F.-based marketing startup SilkChart is also keeping its recruiting practices pretty tight.
The seed-stage company is still fairly small, so its still primarily recruiting from its own network. But co-founder and CEO Andreea Francis thinks it’s a great time to be hiring.
"I honestly think it's probably a better time to hire than it has been in the past decade as a startup. Even as recently as a year ago, it would've been a lot harder as a fresh out of YC, seed-funded startup to attract folks who are looking at Facebook and Google and Apple," Francis said. "But I think now that these companies feel less stable, people are open to earlier stage companies."
