The information sector — the BLS category that captures most of what colloquially gets called 'tech' — shed 78,000 jobs in the first quarter of 2025, the largest quarterly decline since the dot-com bust. The losses were concentrated in software publishing, internet publishing, and telecommunications, and reflected a pronounced reallocation of headcount within major technology employers toward AI and infrastructure roles and away from sales, marketing, recruiting, and middle management.
Major announcements during the quarter included Microsoft cutting 12,000 roles, Meta cutting 7,500, Salesforce cutting 5,500, and Workday cutting 1,750. Several smaller-cap software companies — including Cloudera, Splunk (now part of Cisco), and HashiCorp — also announced double-digit percentage workforce reductions. Few of these companies framed the cuts as performance-related; instead, the public messaging emphasized 'efficiency,' 'AI-driven productivity,' and 'reorienting toward strategic priorities.'
Net headcount at the seven largest U.S. technology companies (the so-called Magnificent Seven, ex-Tesla) fell by roughly 4% over the year ending Q1 2025. Within that net decline, however, AI and machine learning teams grew significantly — in some cases doubling in size — while general and administrative functions, marketing, recruiting, and customer success teams contracted.
The labor market impact was significant for tech workers but modest in the aggregate. The information sector employs about 3.1 million people — roughly 2% of total nonfarm employment — so even a 78,000-job decline across a quarter does not move the headline payrolls number much. But for workers in the affected roles, the displacement was painful: average time-to-rehire for laid-off tech workers extended from roughly 8 weeks in 2022 to over 18 weeks by mid-2025.
The geographic concentration amplified the impact in particular metros. The Bay Area, Seattle, and Austin all saw notable softness in their high-skill labor markets. Tech worker net migration out of California, which had spiked in 2021–2022 toward Texas and Florida, slowed materially as workers stayed put to manage uncertainty.
Outside of tech, Q1 was generally healthy. Total nonfarm payrolls grew by 225,000 per month on average, with healthcare, government, leisure and hospitality, and construction all contributing. The unemployment rate held at 4.0% throughout the quarter.
The Q1 2025 tech downturn also marked the beginning of a meaningful change in how AI was discussed in earnings calls. Companies began articulating concrete productivity gains from AI deployments — particularly in customer support, software development, and content production — and tying those gains to specific reductions in hiring plans. By Q3 2025, those framings had become standard, and many CFOs were citing AI-related productivity as a structural reason to expect lower headcount growth even as revenue recovered.
For workers in adjacent fields — finance, consulting, marketing — the Q1 tech wave was an early warning. Many of the same dynamics — AI productivity gains, post-2021 over-hiring corrections, and elevated capital costs — applied with a lag, and 2025 saw similar (if smaller) restructurings across professional services.