The devil is of course as always in the details. Because the nature and employment structure of what we call "the tech sector" changes so rapidly, it really does depend on how jobs are categorized. So I'd be slow to read too much into what are relatively small changes. Something we do know from other data is that companies are trying to use AI coding assistants to replace entry-level and lower level software engineering jobs. Also that the same is likely happening in tech support roles. However many, maybe most, of those jobs are located outside CA (not least because you couldn't live in the Bay Area on the salaries offered for those jobs). That may be part of why average pay in CA tech jobs is up.
A second point is that while Data Centres create quite a few jobs during their construction (up to the thousands), they result in very few jobs once in operation (often in the tens). Since they also cause a rise in electricity costs (and lower availability for domestic supply, hence housing expansion), they may not be a great loss to CA overall. There's no reason to expect any "spillovers" from then either, since their whole point is to be location free.
It's not clear that the loss of jobs in tech is due to structural changes, or a correction after the massive over-hiring between 2019-2022. Until we see the end of the shakeout of overhiring I don't think we'll really have a clear picture how employment in tech has changed.
"The massive downturn in tech employment preceded the deployment of ChatGPT": the Trump tax cuts from the late teens required that the R&D tax credit be repealed in 2022, order to pay for the tax cuts. This is why we started laying people off and stopped hiring new people. This tax change was repealed in the Big Beautiful Bill; we might see a hiring pickup once it becomes clear that AI is not all that useful for replacing tech jobs.
I work in IT for a giant company with a small Silicon Valley presence.
<<Only time will tell how much AI will replace or complement existing programming jobs as the technology continues to develop.>>
I think the prospects for programmer demand are poor. The AI companies are prioritizing code generation because it helps them with their work. Also, as phone and computer interaction becomes increasingly focused on typing text into chat interfaces (or speaking to them), there is less need for front end developers.
Losing share not absolute loss, based on the chart you are showing. Two very different trends. As tech gets routinized, one should expect tech jobs to shift to lower cost places.
While the American technology industry continues to grow, that growth is certainly not evenly distributed across the job market. It was interesting to learn that tech employment has declined significantly over the last couple of years despite AI’s rising popularity and influence. I had no idea that technology employment in California was declining either, as Silicon Valley is home to some of the most prominent tech companies in the world. California’s high cost of living and lack of infrastructure investment could also play a role, as it is much cheaper to do the same job in another state. While artificial intelligence is playing a role in reducing the number of jobs, it was interesting to learn that compensation is rising, suggesting that the tech job market is becoming increasingly concentrated. This was a fascinating article to read with a lot of great insights!
Thanks for writing this, it clarifies a lot. It's wild to read about the massive AI investment and growth in those specific subindustries, but then see tech employment dropping. What do you think is the main driver behind that disconect?
The devil is of course as always in the details. Because the nature and employment structure of what we call "the tech sector" changes so rapidly, it really does depend on how jobs are categorized. So I'd be slow to read too much into what are relatively small changes. Something we do know from other data is that companies are trying to use AI coding assistants to replace entry-level and lower level software engineering jobs. Also that the same is likely happening in tech support roles. However many, maybe most, of those jobs are located outside CA (not least because you couldn't live in the Bay Area on the salaries offered for those jobs). That may be part of why average pay in CA tech jobs is up.
A second point is that while Data Centres create quite a few jobs during their construction (up to the thousands), they result in very few jobs once in operation (often in the tens). Since they also cause a rise in electricity costs (and lower availability for domestic supply, hence housing expansion), they may not be a great loss to CA overall. There's no reason to expect any "spillovers" from then either, since their whole point is to be location free.
It's not clear that the loss of jobs in tech is due to structural changes, or a correction after the massive over-hiring between 2019-2022. Until we see the end of the shakeout of overhiring I don't think we'll really have a clear picture how employment in tech has changed.
"The massive downturn in tech employment preceded the deployment of ChatGPT": the Trump tax cuts from the late teens required that the R&D tax credit be repealed in 2022, order to pay for the tax cuts. This is why we started laying people off and stopped hiring new people. This tax change was repealed in the Big Beautiful Bill; we might see a hiring pickup once it becomes clear that AI is not all that useful for replacing tech jobs.
I work in IT for a giant company with a small Silicon Valley presence.
<<Only time will tell how much AI will replace or complement existing programming jobs as the technology continues to develop.>>
I think the prospects for programmer demand are poor. The AI companies are prioritizing code generation because it helps them with their work. Also, as phone and computer interaction becomes increasingly focused on typing text into chat interfaces (or speaking to them), there is less need for front end developers.
Losing share not absolute loss, based on the chart you are showing. Two very different trends. As tech gets routinized, one should expect tech jobs to shift to lower cost places.
While the American technology industry continues to grow, that growth is certainly not evenly distributed across the job market. It was interesting to learn that tech employment has declined significantly over the last couple of years despite AI’s rising popularity and influence. I had no idea that technology employment in California was declining either, as Silicon Valley is home to some of the most prominent tech companies in the world. California’s high cost of living and lack of infrastructure investment could also play a role, as it is much cheaper to do the same job in another state. While artificial intelligence is playing a role in reducing the number of jobs, it was interesting to learn that compensation is rising, suggesting that the tech job market is becoming increasingly concentrated. This was a fascinating article to read with a lot of great insights!
Thanks for writing this, it clarifies a lot. It's wild to read about the massive AI investment and growth in those specific subindustries, but then see tech employment dropping. What do you think is the main driver behind that disconect?