Millions of Americans and folks around the world whipped out their controllers and invested in consoles and games while cloistered in their homes amid pandemic lockdowns.

In the U.S., total consumer spending on video games jumped from $43.5 billion in 2019 to $59.6 billion in 2021, according to research from the NDP Group and Entertainment Software Association.

But industry growth began stabilizing last year, which reported a 5% dip in spending to $56.6 billion.

According to industry expert Amir Satvat, roughly 6,500 workers in the video game industry have been laid off globally since January, as companies grapple with rising production costs and increased competition.

But part of the problem, experts say, is tied to the gaming industry becoming more deeply embedded with big tech, which spent big and hired widely during the pandemic, only to take some drastic cost-cutting measures within the last couple years.

Take Amazon, for example, which recently gutted 180 jobs from its gaming division, including its Game Growth and Crown Channel initiatives.

Or, Microsoft, which reportedly cut thousands of jobs earlier this year, including in its Xbox division, but just completed its acquisition of Activision Blizzard, the gaming giant behind Call of Duty and World of Warcraft.

“I don't think this is a game thing. I think this is a tech thing,” Michael Pachter, a gaming research analyst at Wedbush Securities, told Bloomberg earlier this year.

What this means for workers

Gaming companies—and the wider tech industry—which embarked on hiring sprees and pricey investments during the pandemic are now dealing with inflation driving up production costs and interest rate hikes increasing the cost of borrowing.

The end result: division closures, hiring freezes, and hundreds of thousands of layoffs.

The data shows over 250,000 tech workers have lost their jobs so far this year—already more than 50% higher than what was reported last year.

And women have been disproportionately affected, with an Axios analysis indicating 45% of tech industry staff that were fired between October 2022 and June 2023 were women. That’s despite women comprising a much smaller share of employees in the sector.

“Paired with tight economic conditions, the impact of layoffs has been amplified by reduced hiring and increased job competition,” International Game Developers Association executive director Dr. Jakin Vela told Polygon.

“This has been one of the most volatile periods in the games industry in the last 15 years,” he said.

Video game developers and other tech workers have lost their primary source of income at a time of high prices and interest rates, and are now being thrust into a softening job market with no guarantee of stability, especially as the threat of a recession next year looms closer.

“People are dealing with inflation, we’re dealing with other economic factors,” video game producer Shayna Moon told Polygon. “People are getting cut into shark-infested waters.”

It’s not just games

Beyond the video game sector and its big tech parents, there have been several other industries taking cost cutting measures after enjoying substantial growth during the pandemic.

Pandemic winners like Zoom and Netflix are seeing subdued demand, and dollar stores’ stocks are suffering as consumers shift away from discretionary purchases.

The overall labor market is losing steam as well, adding just 150,000 jobs in October—the lowest number since January 2021—and experts are predicting job growth to continue its slowdown next year.

But while some analysts are still forecasting a soft landing in 2024, with the unemployment rate remaining relatively low, some sectors, like video games, remain extremely competitive and susceptible to market changes.

That could be a good thing or a bad thing, depending on how the economy performs next year.

“Games are not a recession-proof industry,” Laine Nooney, assistant professor of media industries at New York University, told Bloomberg. “Games are really reactive to markets.”