If it's actually engineering I'm sure they'll all have jobs in a week but it's still hard to find talent so why wouldn't they just move people around?
Not necessarily. This information could have come from some low-level employee who happened to overhear a conversation between two managers.
The CEO and his inner circle of executives can't just lay off hundreds of employees on their own. They need to involve lots of lower-level managers in this planning, since upper management generally has no idea what each employee is doing and how essential they are to the company. So they ask each of their direct reports to make a list. And once dozens of people know that layoffs are coming, it's difficult to keep it a secret.