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Christopher Ross

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Before AI was the explanation: pandemic hiring, higher rates and the layoffs of 2022 and 2023

By 6 min read

Before AI was the explanation, the executives who made the cuts gave a different one in writing. What Meta and Alphabet said in 2022 and 2023, what interest rates did, and why one popular tax theory does not fit 2026.

Key takeaways

  • In 2022 and 2023, Mark Zuckerberg and Sundar Pichai explained mass layoffs in writing as the result of their own hiring decisions. Neither memo said a model had taken the work.
  • Amazon's year-end headcount went from about 798,000 in 2019 to about 1,541,000 in 2022. That figure includes warehouse and operations staff, so it measures a retailer's growth and not only office roles.
  • The Federal Reserve moved its target range from 0.25 to 0.5 percent in March 2022 to 5.25 to 5.5 percent in July 2023. The Section 174 tax theory for tech layoffs does not fit 2026, because the 2025 law restored immediate deduction of domestic research costs.

There is a stretch of recent history that is easy to forget when the current explanation is AI. The people who made the earlier round of cuts explained them in memos that are still online, and I find those more useful than most commentary, because the authors had to sign them. Whether AI explains 2026 is the question in AI is in the budget more than in the headcount. This piece goes back to what was said before AI was the answer.

What Meta and Alphabet wrote

On 9 November 2022, Mark Zuckerberg wrote to Meta staff: "At the start of Covid, the world rapidly moved online and the surge of e-commerce led to outsized revenue growth." Of the prediction that followed, he wrote: "I got this wrong, and I take responsibility for that." The company cut about 13 percent of its team, more than 11,000 people (Meta, 9 November 2022).

On 20 January 2023, Sundar Pichai wrote that "over the past two years we've seen periods of dramatic growth" and that "to match and fuel that growth, we hired for a different economic reality than the one we face today." Alphabet reduced its workforce by approximately 12,000 roles, and he added, "I take full responsibility for the decisions that led us here" (Google, January 2023). The memo as published does not mention the pandemic by name, so I am quoting only what it says: growth, then a mismatch.

Both letters describe a company that expected a level of demand that did not hold.

How big the hiring was

Amazon's 10-K for 2019 reports "approximately 798,000 full-time and part-time employees" at year-end. Its 10-K for 2022 reports "approximately 1,541,000" (Amazon 2019 annual report, Form 10-K; Amazon 2022 annual report, Form 10-K). That is close to double in three years, and it includes fulfilment and operations staff, so I use it only as an illustration of how large pandemic-era hiring got at big employers. I did not compare Meta's or Alphabet's headcount here, and the connection to their memos is an inference.

What rates did

The Federal Reserve raised its target range to 0.25 to 0.5 percent on 16 March 2022. By 26 July 2023 it stood at 5.25 to 5.5 percent. Funding, borrowing costs and share-price valuations all react to that, and hiring plans built for cheap money tend to get revised.

Martha Gimbel, executive director of Yale Budget Lab, ties the present low-hire, low-fire labour market to the pandemic hiring surge, the Federal Reserve's rate hikes and political factors, and says AI attribution can help executives avoid talking about tariffs, immigration limits and policy uncertainty (as reported by Fortune, 2 February 2026).

The tax theory that does not fit 2026

A popular explanation in 2025 was Section 174 of the U.S. tax code. Grant Thornton's summary says the 2017 tax law required companies to capitalize and amortize research costs, domestic ones over five years, for taxable years beginning after 31 December 2021, and that software development counts as research for this purpose (Grant Thornton). Some commentators called that a hidden cause of the tech layoffs. I have not weighed that argument myself, and it may well have mattered in 2022 to 2024.

The timeline matters more for 2026. The 2025 tax law added Section 174A, which, per the same summary, allows immediate deduction of domestic research costs "paid or incurred in taxable years beginning after Dec. 31, 2024." The IRS issued Revenue Procedure 2025-28 in August 2025 with procedural guidance. A rule that was relaxed in 2025 is hard to hold up as the main reason for cuts announced in 2026. How software costs are treated under the new section may still be sorted out by further guidance, so I would not call the question closed.

Why this matters for 2026

None of this proves AI plays no role now. The big cuts of 2022 and 2023 were explained by their own authors as the correction of an earlier bet, and nobody credited AI. The 2026 cuts at Meta are explained, in Fortune's account of the May memo, by competition in the AI race, and Reuters, as Fortune relays it, reported they were partly meant to offset AI infrastructure costs. Between those two rounds came a long stretch of expensive money and a labour market that cooled.

It is easier to say "AI" than to say "we expected demand to stay at pandemic levels," and Oxford Economics, as Fortune reported in January, suggests some firms prefer the first for investor messaging. That is a motive worth keeping in mind, and no one has shown it for any single company. If you want a company's own account, read its memo first and the commentary second. For the 2026 evidence on early-career hiring, see The entry-level hiring gap is the clearest AI signal so far.

How this was made. AI tools did the source reading and checking for this piece, and AI reviewers argued against the draft before it went out. The question is mine, and so is the decision to publish it.

Common questions

Did the pandemic cause the 2022 and 2023 tech layoffs? The CEOs of Meta and Alphabet described them as corrections to growth and hiring decisions. Zuckerberg named the pandemic e-commerce surge directly. Pichai referred to two years of "dramatic growth" and hiring "for a different economic reality." Interest-rate increases ran in the same period.

Is Section 174 the reason for tech layoffs? It may have contributed from 2022 to 2024, and how much is debated. It is a weak explanation for 2026, since the 2025 tax law restored immediate deduction of domestic research costs for taxable years beginning after 31 December 2024.

References

Checked against the sources above, as listed, on 2026-10-29.