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This week's video is the simplest explanation of what's happening in the software engineering job market that looks like this:

The leftmost is the beginning of 2020, and the gray indicates recession. The blue line is the software development job posting on Indeed in the US (Jan 2020=100), and the red line is the federal fund's effective rate. Take this graph a look again after watching my video:

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📹️ Watch it now on YouTube​

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For those who don't like watching a 4-minute video, here is the transcript. (I hope you watch the video for visuals, and please "Like" it on YouTube!)

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Many people think AI will replace software engineers, but I think the number of software engineering jobs will increase as AI use cases are developed. Hear me out.

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We are in the multi-year correction period of software engineering jobs in the USA.

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There was tremendous overheating in the software job market between 2017 and 2022. Waves of factors created the momentum towards overinvestment that staged the dramatic slowdown from 2023, and it happened with or without AI.

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First, there were economic successes in tech, symbolized by mega IPOs. Laggard (and big) cash started to flow into tech, especially into the US from all over the world. The zero—to super-low interest rate policies in developed countries reinforced this money behavior.

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Soon after the initial shock of the pandemic, people realized that this was the opportunity for a drastic digital transformation. The government further provided liquidity to aid the mainstream economy, only to see the cheap money funneled into digital spending. FAANG went full-throttle in hiring, and the rest followed.

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The great war for talent started. Many saw the future in software engineering jobs. Many boot camp programs started. Some even didn’t take tuition until the students landed the job, thinking it was almost guaranteed to get an offer from a company, if not multiple.

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This created a dramatic inflow of junior software engineer candidates into the market, but the demand was still strong, and the market swallowed everything until…

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The life of staying home finally came to an end finally and so did the digital spend. Meanwhile, the inflation fueled by the war in Ukraine caused the FED to rapidly raise the interest rates to defend the price stability. The money isn’t cheap anymore. If people weren’t getting 5, 10% increases in salary, they were behind the curve. The same is true for businesses with debt and funds. They needed to earn.

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The time to dream big and build new products without worrying about cash flow was over. It felt like a game of musical chairs to many who weren’t affluent of the macro trend.

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Amid massive layoffs, another shock was created by OpenAI. ChatGPT came in like a savior for the money, looking for a place to go. The AI-related stocks skyrocketed. All the startups needed to put AI like a cherry on top to raise funds. The news headlines danced and caused fear among software engineers for losing their jobs for AI, except for those engineers who tried AI for software development.

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The leadership thinks the AI move is the way to raise more money or the stock price. They think AI is the final weapon against wage inflation. Zuckerberg declared the year of great efficiency, and the whole industry followed suit.

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…This made a great headline and certainly did not help the software job growth, but it wasn’t the root cause for the historical job decrease for software engineers. It had been staged already.

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We are in the multi-year correction stage and may not have seen the bottom yet. However, I’m optimistic about the long run.

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AI is truly opening the door for further innovation. But we just learned the reality: it is far from being an AGI, or artificial general intelligence, and it requires humans to steer AI to get the right output. Completing AI-powered use cases takes more work in the last mile.

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With the increased level of imagination and opportunities, the demand for software engineering will increase like we have never witnessed in the past—that’s my prediction.

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Thank you for reading!