With Microsoft's latest layoffs Wednesday, the quickening contraction of Seattle-area tech is starting to feel like previous industry meltdowns, when mounting job losses signaled deep disruptions in the regional economy.

Since May, Microsoft has announced around 15,000 layoffs, including 4,000 in Washington, as the Redmond-based company continues to disrupt its own operations with the powerful artificial intelligence technology it is pitching to customers.

Taken alone, those cuts pale next to the massive layoffs during previous industry downturns — the construction industry crash in the Great Recession of 2008-2009, for example, or the tech layoffs in the dot-com bust in 2000, or, certainly, the Boeing Bust during 1969-1971, when 60,000-plus aerospace workers lost their jobs.

But Microsoft's recent cuts are more significant when seen as part of a broader pullback as Big Tech, long known for rapid growth and generous salaries, scrambles to reinvent its labor model, experts say.

Maybe the Seattle-area won't see a return of billboards asking the last person leaving to turn out the lights," as happened in the Boeing Bust, says University of Washington labor economist Yael Midnight.

But Midnight adds, if AI delivers its much-promised efficiencies to Big Tech, the era of “that kind of money coming into the community seems to be nearing its end.”

How deeply AI disrupts Big Tech as a local job creator remains to be seen. But employment in the sector has already shrunk by nearly 6% since its peak in late 2022, according to state data.

And more cuts seem inevitable as powerful new technologies upend Big Tech much as its own products disrupted other sectors in the past.

"The chickens are coming home to roost for the tech sector," said Jacob Vigdor, an economist with the University of Washington Evans School of Public Policy who follows state and local job markets.

Experts like Vigdor and Midnight are quick to emphasize important differences between Big Tech's current contraction and the previous sector collapses.

The Boeing Bust, for example, followed what was arguably a once-in-a-century perfect storm of economic bad news.

That included higher-than-expected development costs for the 747, falling aircraft sales after nearly a decadelong boom and the cancellation of federal funding for Boeing’s supersonic aircraft.

The combination pushed Boeing to the brink of bankruptcy and forced the company to cut around 60% of its workforce.

The dot-com bubble of the 1990s, meanwhile, was fueled in part by overeager investors propping up tech startups long on hype but short on actual products.

While some dot-com startups, notably Amazon, had solid prospects, many others stayed afloat only because investors were "willing to throw lots of cash at them,” Vigdor said.

Those firms “were doomed as soon as the animal spirits of the market started to turn against them,” Vigdor said.

The resulting bust forced even Amazon to cut to the bone — including around 1,300 workers, or 15% of its staff, in early 2021 — to survive.

On the surface, tech’s situation today is light-years from what confronted either Boeing or the dot-com players, Vigdor said. Unlike those earlier crashes, Big Tech is still booming, with lots of business, deep pockets and huge profits.

Even so, Big Tech has faced its own perfect storm in recent years.

High interest rates have hampered internal investment. The government has imposed hiring restrictions for the foreign tech workers that have been so key to Big Tech's recent growth.

More broadly, starting around 2022, many tech firms began to correct what came to be seen as excessive hiring.

Until then, many companies prioritized continued expansion into new products, services and markets. As a result, they also prioritized aggressive hiring — and generous compensation — to handle the expected workload, said Evan Seguirant, a veteran tech recruiter and founder of Voyager Talent, a Seattle-area firm.

The industry's hiring philosophy, Seguirant said, was, "we're growing. We're adding new features, we're adding new functionality, and the job market is booming."

By 2022 or so, however, many tech firms realized the hot job market "was pretty much unsustainably hot," and were pulling back on hiring, Seguirant said.

Taken together, these factors effectively paused hiring in a sector that for years seemed perpetually starved for talent.

Between January 2015 and August 2022, employment in the “information” job category, which includes most tech sector jobs, grew 57%, or around 7.5% a year, to 175,000 in Washington, according to the state Employment Security Department.

That's more than three times the growth rate for total state employment.

Since fall 2022, however, information sector employment has fallen nearly 6%, or roughly 2% a year, to 165,200, according to state data through May.

That compares to a 10% employment drop the aftermath of the 2000-2001 dot-com bust.

Although a lot of that recent correction was likely without AI, some experts say, the technology has added a massive new twist to the tech job market.

Companies like Microsoft have made huge investments in AI, which has left them with less to spend on hiring.

As important, many tech firms face huge pressure to use that AI technology to transform their own internal operations and labor models.

Where earlier waves of automation upended blue collar sectors, such as manufacturing, AI is now "affecting jobs that historically were safe from automation," said Anneliese Vance-Sherman, chief labor economist at the state Employment Security Department.

And because many of those "historically safe" jobs are in the tech sector itself, companies now are in the awkward position of needing to demonstrate their new tools on their own operations.

"If you're preaching about the efficiency of AI, and you're making so many investments in AI, why would you … continue to hire, hire, hire and grow into a massive, bloated company?" said Voyager's Seguirant.

"That, as a general, permeating mindset, leads to much different ways in which these companies act, including in how they hire," he added.

What this new mindset actually means in terms of actual job growth going forward is a complicated question.

With the industry's hiring correction largely completed, one big unknown is how quickly AI will not only replace current jobs but also create new ones.

Although Microsoft itself insists it isn't using AI to replace programmers and other workers, other firms have been more explicit about the impacts on hiring.

In June, Amazon CEO Andy Jassy told employees the company's growing internal use of AI could lower the number of corporate employees over the next few years.

One likely scenario, some experts say, is several years of smaller layoffs, as tech companies figure out how to deploy the new technology and discover new uses.

Hiring growth could resume after that, albeit at a rate well below that of the past two decades.

That's likely to mean a lot of anxiety for current tech employees, and frustration for the tens of thousands of students who poured into computer science programs in the hopes of six figure salaries and stock options.

It's also certain to mean changes for a region long accustomed to the steady influx of well-paid workers.

A decade ago, that influx was so powerful that it helped pull the Seattle-area out of the Great Recession, when the more traditional job creator, the construction sector, was still flat on its back, said Vance-Sherman, with the state Employment Security Department.

In the years since, that influx has fueled a huge jump in regional wealth for both private companies but also governments, which have gained in tax revenue on construction and real estate sales.

With AI, however, a very different scenario emerges — one in which the tech sectors remains highly profitable, but the region sees less growth in spending and taxes.

If AI is a success, a slower growing tech sector could "continue to innovate and bring new products and services to market and rake in profits far as the eye can see," Vigdor said.

But for all the businesses that have grown to depend on a faster growing tech sector, this new, more efficient hiring model could prove costly. And a public sector long accustomed to tech-fuel tax growth is “going to be dealing with catastrophe, Vigdor said.

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