> After a few demoralizing layoffs you have a tendency for talented folks to leave once the picture is clear

From what I've experienced, there's a double whammy here. Only the talented folks remain, but they all know better than to stick around, so the company dies shortly after.

Yes, that's why companies don't like to fire people in general. Alas, sometimes the choice is between firing people, taking morale hit and likely dying later, or not firing anyone, and dying much sooner and with certainty.