Why not both? Companies are large complex systems that require pruning over time just like any other complex system. Sure you can move a few people around or ask them to spend a little less, but ultimately it would become nearly impossible to respond to market conditions, or even just your own business changes/learnings, without laying people off.
There are plenty of ways to respond to market conditions without kicking people to the curb. Most companies have performance reviews to do exactly this.
