When 5% means 5,000 people without jobs, it's a lot. I don't work for MS, but I live in Seattle. I guarantee you every tech company in the area is affected in some way by this.

Within MS, the uncertainty will be detrimental to the entire culture there until all they layoffs are done and probably for quite awhile after that.

Outside MS seeing the largest company in town, one that rarely lays people off, axe so many jobs will have everyone nervous. No matter what your feelings about MS are, their influence in Seattle (not to mention elsewhere) is huge and a layoff of this size means a lot.