Tech layoffs are mounting and job postings are down 36% from pre-pandemic levels — yet 87% of tech leaders say they still can't find skilled workers. Here's what the data actually shows about where engineering demand is contracting and where it's quietly surging.
The July 2025 jobs report landed with a thud: total nonfarm payrolls grew by just 73,000, and the BLS revised May and June figures downward by a combined 258,000 jobs. For engineers and hiring managers watching the market, that macro backdrop matters — but it only tells part of the story. A more precise picture emerges when you look at the engineering and tech sectors specifically, and that picture is genuinely split.
The Broad Contraction Is Real — and Deeper Than Headlines Suggest
Tech job postings are down 36% from their pre-pandemic level, according to Indeed Hiring Lab data through July 2025, and the hiring freeze has entered its third consecutive year. Of the 149 tech job titles with at least 1,000 postings tracked by Indeed, only 19% have recovered to pre-pandemic levels. Software engineering — still the most common tech title — is down 49%.
Challengerr, Gray & Christmas data for July 2025 adds more weight: U.S. companies announced 62,075 job cuts in July alone, a 29% increase from June, with retail, tech, and government leading the categories. TechCrunch's tracker put the July tech-specific figure at 16,327 layoffs, with at least 127,000 tech workers cut in mass layoffs across 2025 so far. The East region saw a 219% year-over-year spike in job cuts, driven largely by federal agency reductions concentrated in Washington, D.C.
The sharpest single data point may be this: overall programmer employment fell 27.5% between 2023 and 2025, based on BLS figures. Hugo Malan, president of the science, engineering, technology and telecom unit at Kelly Services, called it "a tectonic shift," noting that the pace of decline accelerated with the rise of generative AI coding tools. Entry-level coding roles have been hit hardest.
The AI Exception: Where Demand Is Actually Growing
Not all engineering roles are declining. Jobs directly related to AI — machine learning engineers, NLP engineers, AI/ML infrastructure roles — are among the few tech categories with postings still above early-2020 levels, per Indeed Hiring Lab. Generative AI job postings specifically jumped 170% year-over-year from January 2024 to January 2025, though they still represent a modest share of total job volume.
A 2025 report from the AI Workforce Consortium, led by Cisco, found that 78% of ICT roles now include AI technical skills as a requirement, and seven of the ten fastest-growing ICT roles are AI-related — including AI/ML engineer, AI risk and governance specialist, and NLP engineer.
For engineers, the implication is direct: credentials that defined a competitive profile in 2021 are depreciating quickly. AI fluency is increasingly a baseline requirement, not a differentiator.
The Skills Hierarchy Is Inverting
Perhaps the most telling signal for hiring managers is how demand has shifted at the seniority level. Research tracking staffing requests shows that in 2022, roughly 60% of engineering hire requests were for mid-level developers and about 30% for seniors. By 2024, those figures had nearly reversed: roughly 25% mid-level and 65% senior, with AI specialists making up the remaining 10%.
Robert Half's survey of tech leaders found that 87% report difficulty finding skilled workers — even as layoffs continue mounting. That apparent contradiction resolves once you recognize it as a skills mismatch, not a supply shortage. There are plenty of engineers in the market. The profiles organizations actually need — senior engineers with systems-level thinking and real AI fluency — are comparatively scarce. Demand for AI governance skills is up 150% and AI ethics skills up 125%, reflecting how much the definition of "senior" has expanded.
Indeed's research found that 45% of hiring managers cite a lack of skilled applicants as their top hiring challenge. The same Hiring Lab report analyzed nearly 3,000 skills and found that 54% are likely to undergo significant transformation — with technology-related skills dominating that list.
What This Means If You're Hiring — or Job Searching
For hiring managers: the efficient move right now is precision over volume. Posting broadly for generic software engineering roles generates noise, not signal. Defining exactly what seniority level and AI-adjacent skills your team needs — and moving decisively when the right candidate appears — matters far more than it did three years ago. Specialized technical staffing partners that vet for high-skill profiles (like Ryzlink) can meaningfully compress the time from search to offer.
For engineers: the data strongly argues for investing in AI fluency and systems-level thinking rather than competing in an increasingly crowded entry-level space. The market isn't disappearing — it's concentrating. Roles in AI/ML engineering, AI governance, and senior full-stack development with AI integration are growing even as the broader market contracts.
The "tech layoffs" headline story is real, but incomplete. Underneath it is a structural restructuring that rewards precision — from both sides of the hiring equation.
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