Bay Area Tech Job Market Shows Signs of Recovery After Two Years of Layoffs, UC Berkeley Economist Says

The Bay Area’s tech job market is beginning to stabilize after two years of significant layoffs, though the recovery remains tied to artificial intelligence growth rather than traditional big tech hiring, according to UC Berkeley Economics Professor Enrico Moretti.

Major tech employers including Google, Meta, and Salesforce have dramatically slowed their hiring and implemented deep layoffs over the past two years, Moretti told Berkeley Social Sciences in a recent interview. The professor, who researches labor economics and urban economics, attributed the cuts to rising interest rates in 2022 and aggressive hiring in previous years that left companies with bloated headcounts.

“The tech industry was one of the main sources of labor demand in the past; and I think for the time being, it seems to have weakened significantly,” Moretti said.

However, the professor identified promising growth in the AI sector, particularly in San Francisco and Palo Alto, where new employers have begun expanding their workforce. “I’m optimistic that they might, at least in the future, help with demand for the tech sector,” he said.

The slowdown in tech hiring creates ripple effects throughout the Bay Area economy, according to Moretti’s research. When tech companies hire workers, they generate demand for local services beyond the technology sector itself.

“When a tech employer hires somebody, they don’t just create one job in the tech sector, but they also increase overall employment in the Bay Area through the demand for local services,” Moretti explained. The additional income flows into retail, housing, restaurants, education, healthcare, and personal services.

Job seekers currently face longer search times compared to previous years, though Moretti noted the Bay Area’s job market remains competitive with other comparable regions. “It’s definitely taking longer than before,” he said, describing the current market as “softer” due to decreased demand.

The challenging conditions particularly affect recent graduates entering the job market. However, Moretti expressed optimism about future prospects, suggesting the region may have hit bottom several months ago.

“I think my best prediction is that we have reached a trough a few months ago, and I think the local labor market is bound to improve,” he told Berkeley Social Sciences. The professor predicted the coming months and years will offer improved job opportunities, contingent on avoiding a national recession.

Moretti, who joined UC Berkeley in 2004, has received numerous awards for his economic research, including the Society of Labor Economists’ Rosen Prize, the Iza Young Labor Economist Award, a Fulbright Fellowship, and the Carlo Alberto Medal.

His assessment comes as San Francisco continues to navigate its role as a major tech hub amid industry-wide changes. The region has long depended on technology companies as primary drivers of economic growth and employment.

The professor’s analysis suggests the Bay Area economy faces a transition period where traditional big tech companies pull back while AI-focused firms expand. This shift could reshape the region’s employment landscape in coming years.

“If a national recession doesn’t take place, I think that in years ahead, labor demand in the Bay Area should be good relative to other parts of the country,” Moretti said, though he cautioned against discounting the possibility of broader economic challenges.

The economist’s research highlights how deeply interconnected the Bay Area’s economy remains with its technology sector, where changes in tech employment create cascading effects across multiple industries and service sectors throughout the region.