This suggests we aren't witnessing a cyclical downturn, but a structural "displacement event" driven by a rotation in capital and compute requirements.
Three observations for discussion:
1. *The Infrastructure Bottleneck:* While application-layer development is being compressed by agentic IDEs and higher-level abstractions, the demand for the "underlying" stack (vector orchestration, GPU cluster optimization, custom RAG pipelines) has entered a state of acute scarcity. 2. *The Depreciation of Mid-Level Generalism:* We are seeing a "Mid-Level Squeeze" where companies prioritize either "AI-Native" entry-level talent (low cost, high adaptability) or Staff-level architects. The traditional 4-8 YOE generalist feature developer appears to be the primary demographic of the current layoff cycle. 3. *The Revenue-to-Engineer Ratio:* For the first time, we are seeing "Agentic" teams of 2-3 engineers maintaining systems that previously required 15-20. This shift isn't just about efficiency; it's about the fundamental unit of labor changing from "writing lines of code" to "orchestrating system logic."
Is the $5.5T "gap" actually fillable by the current workforce, or are we looking at a permanent bifurcation where a large segment of the legacy SWE population becomes structurally unemployable without a complete ground-up retraining in the data/inference pipeline?
jppope•18h ago
Companies are claiming that they are achieving productivity gains from AI yet we've seen basically no evidence of it. Furthermore, if there were gains from it, we would expect the companies seeing the benefit to invest more into those productivity gains rather than less. Or put bluntly, they claim they are "buying money at a discount" but they just don't feel like buying more money.
The more reasonable explanation is that the economy is actually not in great shape, and companies/leaders are lying about the state of their companies (shocking right?). Companies are taking advantage of "AI" (LLMs) in narrow fields that are already highly codified (software, medical, legal, etc) but adoption is lower or even unwanted in other areas.
The labor market in software probably reflects this. You would avoiding hiring unless you need to; if you need to you are going to hire well because there is a lot of talent in the labor market... the only exception to this might be companies willing to take some risks (lower skill labor) for various reasons (financial, industry, etc).
There are a lot of charlatans out there selling this vision of a world where agents do all the work and software engineers are completely replaced... but it doesn't hold any water. Expect Javons paradox to be your favorite phrase as soon as the economy starts doing better.