OTTAWA – Around the world, more than 84,000 tech workers were laid off by 259 tech companies in January alone, the most in a month for the sector in three years, according to website layoffs.fyi. That same month, 13 Canadian tech firms cut at least 1,067 roles. 

Adding layoffs during the first week of February, the total for 2023 has now topped 97,000 as of Tuesday. Despite the wave of job cuts sending tremors through the sector in recent months, tech analysts and HR experts say the bigger talent picture isn’t all negative. The layoffs are a drop in the bucket for Canada’s massive tech sector, they said, and startups now have an opportunity to regain some ground in hiring negotiations.

During the pandemic, some tech companies forecast that the heightened level of consumer and corporate demand for digital services would continue, and when market conditions worsened, realized they may have overstaffed, said Richard Tse, a technology research analyst at National Bank Financial Markets.

Vancouver-based Hootsuite, for example, reportedly grew its headcount from 1,200 to more than 1,400 employees from January to June 2022 before making three rounds of cuts between August 2022 and January 2023, slashing around 520 jobs.

Montreal’s Lightspeed Commerce grew from 1,800 workers in March 2021 to about 3,000 by March 2022, before letting about 300 employees go in January. Similarly, Vancouver-based Thinkific almost doubled from 270 employees in the first quarter of 2021 to 499 the same quarter a year later, before slashing 176 jobs in two rounds of layoffs in March 2022 and January 2023.

Yet, between January 2020 to December 2022, in the broader sector, the number of people employed in professional, scientific and technical services grew from 1.57 million to 1.87 million, or about 19 per cent, according to Statistics Canada.

“These layoffs are nowhere near getting us back to pre-COVID levels of employment,” said Amit Taylor, founder of tech careers website TrueUp.io in New York. “In reality, there are a lot more people working in tech now than there were a couple of years ago, even with all these layoffs.”

Brendon Bernard, a senior economist at Indeed Canada, said the total number of Canadian tech layoffs in 2023 may be upwards of 1,000 employees, but when the industry-wide number of workers is so large, “it’s tough for a handful of companies to move the dial on the number of people working in the sector.”

Still, just because cuts are happening after a period of overhiring doesn’t mean the wave of layoffs reflect a pattern of “last in, first out,” Taylor said. Some of the workers who recently lost their jobs had been working at their company for many years.

Tse said the cuts were motivated by investors shifting their focus from revenue growth to long-term profitability. “People are looking for companies that can show a path to profitability, that’s putting them in a position where they need to restructure,” he said, adding that tech firms need longer cash runways and are being more discerning with how they allocate capital, leading some to pull back on “moonshot” projects. 

Canadian tech firms are also adapting the focus of their hiring. At the executive level, companies are recruiting more for sales and marketing roles than for product and engineering, said Kristina McDougall, managing partner and founder of Waterloo, Ont.-based executive search firm Artemis. “Companies are looking at growing their customer base, as opposed to just raising to build future products,” she said.

There hasn’t just been a shift in what skills are in demand—there’s also been a power shift as employers’ hiring appetite cools. Tech job postings in January were down 43 per cent from its peak in May 2022 with the number of posts up 22 per cent compared to February 2020, less than half the market average growth rate at 53 per cent, according to data from Indeed Canada. 

The statistics for tech salaries followed a similar trend. Tech workers no longer enjoy the salary negotiating power they had during the boom. “Now that opportunities have really come down over the past six months, I think the balance … has shifted back from a job seeker’s market to one that’s more in between job seekers and employers,” said Bernard. 

From the beginning of the pandemic to mid-2022, some companies had trouble filling senior technical roles, but they may have an easier time finding candidates as the talent market rebalances, he said.

Smaller companies might also have the opportunity to recruit top talent that were previously out of reach amid this labour market shift. “We’re seeing startups have access to CTOs and leaders that are flexible on compensation where they weren’t before,” McDougall said. “If you’re a company that’s looking for an opportunity to grow, this might be a really interesting window to get somebody that you wouldn’t have been able to get before.”

For those who lost their jobs, McDougall said it may take some time to land a new role, but she remains optimistic. “Like a coin sorter, you shake it and it takes a little while for everyone to find the hole they fit into perfectly … because there is not perfect information around people finding that right spot and timing lining up,” she said.

“There is still growth, there are still opportunities,” said McDougall. “There’s more competition, for sure. But we still have a net [talent] gap. It just takes a little bit longer to find that right spot.”