Absolutely brutal.
I was a Windows developer at the time and I remember a co-worker of mine left to join a startup and make it big. He started work at 8am, was downsized by 2pm and the company shut-down 2 days later. I worked with another guy who was going back to school for a certification, one of those early for profit schools, they had apparently invested much of their profit and when the market crashed, simply fired everybody in the middle of a semester, locked the doors and walked away.
Many of my peers moved back in with their parents and for lack of a job, simply went back to school and got their M.S.'s hoping to ride it out. I know a number of people who left the field entirely and started all kinds of random businesses: personalized woodburnt gift "cards", home-made chocolates, etc.
The company I worked for ended up simply running out of money, nobody had liquid capital to do anything like buy things or be our customer. We simply stopped getting paid.
I left, and through some connections, found a paid internship in a different career to make ends meet, on weekends I refurbished people's decks and delivered rides to kids' birthday parties. Through a twist of fate, my wife was in a weird immigration status and couldn't work (in those days you needed a work authorization card while waiting for your green card and the government was way behind in keeping them up-to-date). We were literally eating Ramen and Taco Bell for most of our food. I grew up pretty poor so it wasn't too much of a downslope, but it was pretty distressing for my wife. One pay period, my wife accidentally threw away my pay check in the trash, we wouldn't have been able to make rent and would have ended up homeless if I hadn't gotten my company to void it and issue me a new one.
Then 9/11 hit and things got worse. Immigration processes absolutely ground to a halt. My wife lost a job she had been able to get on her work authorization papers when they expired and the Immigration service forgot to issue her a new one. I remember an exorbitant anniversary dinner we went to at Olive Garden. We saved up for 2 months for it. It cost about $35 for the two of us. We asked for another basket of all you can eat breadsticks and a pasta refill then took the entire basket and all the pasta home with us so we could split it on another meal.
The place I was working at was delighted with me, and as a reward offered me another paid internship. Nonplussed with their generous offer, I applied to something like 300 other open positions, but the requirements had become insane: 5-7 years experience in fields that hadn't even existed 2 years prior, for entry-level positions paying less than I was making at my internship! I stayed at my internship. When it expired they offered to convert me to full-time at the same rate, but with benefits now being taken out I was bringing home less money!
It was about this time that lots of the courtesy in the hiring process disappeared, things like calling back applicants to let them know their application had been reviewed but they had decided to go another direction, that sort of thing, simply stopped.
On top of all of this, outsourcing was becoming a thing, and tons of jobs were moving to India. Many major employers simply stopped hiring or fired all their technical staff and moved everything overseas. For most of them, it didn't really work out, but it had a major impact in the number of openings and the requirements for the openings. You literally didn't know if your job would exist from one-week to the next.
For me, things started to turn around some time in 2003-2004. My wife finally was able to work after getting her Green Card, my internship converted into a full-time position with better pay, cost to borrow money was stupid low (at the time) with bizarre favorable finance rules (that later got the country in trouble) and we bought a house and started building equity.
The housing market became insane and we sold our house, 2 years after buying it, for a 40% profit. In the meanwhile both of our careers had turn into actual careers and not desperate grabbing at scraps. Outsourcing started to show major weaknesses.
A lot of the excesses of the dot-com bubble and pre 9-11 were carefully scrutinized. Dumb shit like starting a company and spending half the investment money on lava lamps were understood to be a bad thing now. Actually needing a business plan became important. It stopped being possible for 19 year olds with 2 years of experience and a 9 page resume made up of fabrications to get hired into mature startups as directors of engineering and paid $200k salaries. Perl started to fall out of favor as a major force in the development of the Web and Java shops started to become a major "thing".