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What Would a Recession Mean For Developers?

By Lane Wagner on May 26, 2022

With markets in a slump, many of us are concerned a recession could be right around the corner. The NASDAQ is already down 27% so far in 2022. Heck, maybe we’re already in the middle of a recession.

If you are a developer, or are in the middle of learning to code, you may be justifiably wondering whether or not a recession will have an impact on your personal career.

Wait, what recession?

Well, no one really knows where the markets are going in the future, but things are getting rocky quickly. Y Combinator, arguably the most successful tech startup accelerator wrote a letter to the founders they have funded where they say:

No one can predict how bad the economy will get, but things don’t look good. The safe move is to plan for the worst. If the current situation is as bad as the last two economic downturns, the best way to prepare is to cut costs and extend your runway within the next 30 days.

I have no idea if the market is going down another 20%, is going to rebound to all-time-highs by the end of the year, or if we’ll trade sideways for the next few months. If I were you, I’d be wary of anyone who is telling you that they do know what is going to happen, especially if there is a price tag attached to the information. What I do know is that there is a sentiment sweeping across the tech industry that has company leaders thinking about tightening their budgets to weather a storm - whether or not the storm comes.

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The markets have been anything but normal lately

For the last decade, stocks have been way up, especially tech stocks. Let’s look at some of the winners.

2011 Price~$180~$307~$28 IPO in 2012~$25
2021 Price~$3,256~$1,738~$267~$565
% Return~1,708%~466%~853%~2,160%

Tech as an industry has outperformed the market. NDXT is the ticker for the “NASDAQ 100 Technology Sector Index”, and that has grown from ~$1454 in 2011 to ~$7867 in 2021, a cool return of ~441%. By comparison, VTI, the “Vanguard Total Stock Market ETF” that tracks the entire US stock market went from $66 to $199 “only” had an return of ~201%. With these exponential returns associated with the paradigm shift in the way we do business, at a certain point the music must slow back down, which is what is probably happening now.

Companies that included words like “cloud computing” and “mobile first” in their press releases received fantastic valuations from investors over the last decade, and that largely panned out, as they generally went on to make money hand over fist. It hasn’t hurt that for the last ten years, the Fed has had interest rates at historic lows and has been flushing the markets with cash via quantitative easing. I won’t get into the nitty gritty of QE and interest rates, but I’ll explain the consequences I expect as a result of some coming changes.

Both of those points basically have the same consequence: borrowing money is expensive, and as a result companies will grow more slowly, and hire less.

Finally, the market advantage of tech companies might also be waning. Companies that haven’t innovated have been dying (think Blockbuster and Macy’s). The survivors are taking advantage of the efficiencies investment in tech brings, which means the competition among “tech companies” is higher than it once was, which makes the returns harder to find. I believe this all culminates in a few headwinds for developers.

When an industry is flush with cash, it’s easier to find jobs in that industry

So, assuming the industry won’t be what it once was, what does that mean for those of us who work in tech? Well, it means that the insanely-hot hiring market will cool down a bit. The days of recruiters pounding down your door if you have 6-months of experience listed on LinkedIn might be over.

Less investment money means fewer startups and fewer “series-X” fundraising rounds. Less cash in a business’s pocket means slower growth, and slower growth means less hiring.

What kind of developers would a recession impact the most?

Junior developers have always had a harder time finding work than mid-level or senior developers. Frankly, that first job has always been hard to land, but landing any job once you have some experience under your belt has been much easier historically. I think entry-level developers will unfortunately be disproportionately impacted by a “tech recession”. Now more than ever, the competition among entry-level devs will be fierce. It might not be enough anymore to attend a 12-week bootcamp and come out the other side making $80k.

Second, I suspect that high-growth startups will be hit harder than more established companies. Companies that are profitable will likely be able to take advantage of the market downturn and pick up talent on the cheap. Companies relying entirely on outside investment will have to go through layoffs or at least slow that pace with which they snap up developers.

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Don’t panic

don’t panic

Don’t jump ship on development! While the kombucha-on-tap and ping-pong in the office might not be as prevalent, I think developers will still be much better off than most other white collar workers. I haven’t been comparing programming careers to other careers, I’ve been comparing a hypothetical short-term future for developers to what developers have had for the last decade.

Even more, we might all end up being wrong about this recession business. In the beginning of 2020, the stock market ripped down with so much force that companies got spooked and had giant rounds of layoffs. Just a few months later, the biggest market rally in recent history began, which resulted in arguably the strongest market for developers ever.

What can I do to protect myself from a market downturn?

Put simply, you should get better at your job. This is always good advice, it just becomes more important when competition for the same jobs gets fierce.

Technology is at the center of everything we do. There are very few products released these days that don’t have software involved at some level. I’m convinced the mid-to-long-term outlook for developers remains extremely bright, and the near-term isn’t too gloomy.

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