Ok I have some unsatisfying perspective on this from a high level. I consult with series B+ companies in the northeastern US on technology staffing (ymmv outside that microcosm). There is currently a kind of shit tornado of three macro forces that are all applying downward pressure on headcount.

First, the cost of capital is relatively high. Inflation means that companies’ money goes less far. Higher interest rates mean that borrowing is more expensive. PE is scaling back on their spending spree (depending on the sector). Basically every way to raise outside funds has less favorable terms than the last 5-10 years. This has pushed companies to be super conservative on hiring. Many organizations are trying to limit burn and shore up cash on hand. Orgs I work with are ridiculously reluctant to increase headcount unless something is actually on fire. Some companies are even striking backfill that would have been automatic at any other time in the previous 15 years.

Next, there was a huge glut of hiring after the COVID stimulus. Cheap and easy money meant lots of companies waaaaayyy over-staffed. Practically any new initiative justified hiring a whole team and a barista. Today we’re in the hangover phase where orgs are having to downsize. It means fewer positions are available (companies are often slow to hire after a major layoff), then it means that there are more qualified people in the candidate pool. I had a position open up and had multiple applications in the first week that I would have killed for a few years ago. So in this case the bar really is getting higher because of a rich market.

Finally, the elephant in the room is AI. I’ve talked to CEOs that truly believe they will never need to hire another human engineer because Claude will do it for them. Whether that has any merit or not remains to be seen, but in the meantime this attitude is surprisingly pervasive. A CEO is ultimately the person who is deciding on staffing levels, so their perspective that “AI means fewer needed engineers” translates down to hiring practices. I do my very best to talk them down from that view, but seeing AI think pieces on Twitter makes them antsy (I have some wild stories). AI also serves as great confirmation bias that their hiring practices weren’t bad, it’s the kids who were wrong. In fairness, AI absolutely does change things. It just changes in more nuanced ways that vary a lot by sector, stage, scale, and product that can’t be reduced to simple arithmetic.

Ultimately, in debriefs it’s less like “we don’t think this person can do the job,” and more like “we are only getting one head this year so we need them to be exactly what we need.” You can do extremely well in tech and system design interviews but you’re being ranked against a rich pool of candidates for a more constrained number of roles. Organizations’ tolerance for risk on candidates has absolutely tanked leading to being hyper selective even among qualified applicants. I have been in debriefs where we acknowledge that the person was a strong hire, but not someone we could just drop in solve everything.

Hope that answers the question, or at least gives some insight!