Yes, there were massive layoffs in the software development market. But people forget that the majority of software developers and managers during that time did not have a degree in CS. They just picked up some books like “VB Script for Dummies”, “Javascript for Dummies”, “Oracle Unleashed”, “MS Certification in SQL Server 1997”, “How to use Microsoft Project”,… then jumped on the dot com bandwagon. They got jobs through consulting and temp staffing agencies because the managers did not know how to hire. I can say with confidence that 70-80% of developers in the companies I worked for during that time did not major in CS. And a large part of them did not have a college degree. Most of their work was buggy and hard to fix. I saw one of the highly paid VB consultants did now know anything about programming. He used names like Sally, Tom, Dave,… as variables in the code. Many DBAs I worked with in a company handling stock trading data did not how to write a simple SQL query. They only knew how to back up data and run the SQL scripts that some other people and I wrote for them. One time they were not able to restore the data because they never checked to see the backup tape was good or not. When the bubble burst, these people picked up the pink slips first and could not find the next job. People with strong training in CS had some setback too but they were able to find the next job.
It was just an emotional reaction like the emotional investments in dot com high priced stocks.