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It appears that this was heavily orchestrated; right before their earnings call for tomorrow on the 16th. I am expecting an announcement of this layoff from them shortly but their stock is going to be very volatile in the next 24 hours.
Didn't know they were public company
When interest rates are 0%, any amount of growth compounded over years is attractive. When you can get a 5% risk-free return from treasuries, even 7% rate of return is unattractive when compared to the safest asset on earth returning 5%. My point is, layoffs will continue until companies are much more efficient, or interest rates go down.
> My point is, layoffs will continue until companies are much more efficient, or interest rates go down. Exactly what the FED wanted.
When interest rates are 0%, any amount of growth compounded over years is attractive. When you can get a 5% risk-free return from treasuries, even 7% rate of return is unattractive when compared to the safest asset on earth returning 5%. My point is, layoffs will continue until companies are much more efficient, or interest rates go down.
Same here. Rolled over in bed to an email from Yancey to my personal email. Went to my laptop, can't log in, Slack is also dead. Early Spring Break!
Very sorry to hear that, though you seem to have a fairly good outlook about it. Excuse me if it's callous to ask this at this time, but as I've been observing layoffs and been hearing that people are immediately shut down from their systems, I'm wondering: how do they communicate it to you if you can't access your email? Do they reach out to your personal email, call you, send you a letter? I might understand revoki…
Earlier quoted context omitted.
how does interest rate affects company layoffs and why is being more efficient affects that? and why would FED want this? - serious question
The feds “dual mandate” is "maximum employment, stable prices, and moderate long-term interest rates." There’s too much employment at the moment, imperiling price stability and forcing their hand on interest rates. Inflation expectations, particularly”wage spiral”, are tied to unemployment. The historically low unemployment would/should drive further increases in wages due to scarcity/bargaining position of labor. Mo…
Earlier quoted context omitted.
> My point is, layoffs will continue until companies are much more efficient, or interest rates go down. Exactly what the FED wanted.
how does interest rate affects company layoffs and why is being more efficient affects that? and why would FED want this? - serious question
The interest rate can be thought of as the “cost of money”. The higher it is, the more expensive it is to get more money in the short term. This is why 0% was labeled “free”
When companies have access to cheap money it is less risky to invest short term in long term growth. Generally “growth” is expensive up front and pays out over time.
Also, hiring takes time so starting to grow happens on a lag.
Now, we had a long span of cheap money so, companies not only planned to grow but they planned to keep growing. This meant they were hiring today for tomorrows growth.
Money is no longer cheap.
All of the future growth is a lot riskier so any hires made for that purpose are cut. Also any in-progress growth became risky, so some of those hires are cut too. Lastly, there is no growth after the current crop of projects so, as they complete, some or all of those hires are let go.
Cheap money is risk free growth opportunities. Growth needed people. Expensive money is very risky belt-tightening opportunities. That leads to layoffs.
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The FED wants unemployment to go up which will drive demand, and therefore prices, down. That will reduce inflation.
> FED wants unemployment to go up This is wrong. The Fed doesn’t want higher unemployment. It isn’t even willing to tolerate it. That’s the whole “soft landing” conversation, and why hikes are so hesitant. The ideal path would be labor market loosening with no more unemployment. Absent structural adjustments, that’s possible. But we need structural adjustments, so layoffs are necessary, which makes the closest to ide…
Earlier quoted context omitted.
The FED wants unemployment to go up which will drive demand, and therefore prices, down. That will reduce inflation.
> FED wants unemployment to go up This is wrong. The Fed doesn’t want higher unemployment. It isn’t even willing to tolerate it. That’s the whole “soft landing” conversation, and why hikes are so hesitant. The ideal path would be labor market loosening with no more unemployment. Absent structural adjustments, that’s possible. But we need structural adjustments, so layoffs are necessary, which makes the closest to ide…
Softening of labor conditions is pretty directly saying "Increase unemployment".
> and why cuts are so cautious.
They're so cautious because they want to hit the right amount of increased unemployment, not that they don't want unemployment to go up at all.
Earlier quoted context omitted.
> FED wants unemployment to go up This is wrong. The Fed doesn’t want higher unemployment. It isn’t even willing to tolerate it. That’s the whole “soft landing” conversation, and why hikes are so hesitant. The ideal path would be labor market loosening with no more unemployment. Absent structural adjustments, that’s possible. But we need structural adjustments, so layoffs are necessary, which makes the closest to ide…
You're technically correct, but this seems like a bit of a distinction without a difference. The Fed may not want unemployment , but they do want people to lose their jobs, and an obvious risk of people losing their jobs is that they'll be unemployed. There's no guarantee the Fed will stick the "soft landing."
No, they want less nominal wage growth. The less people lose their jobs, the better. But economies don’t adjust without creaking, which means yes, an expected effect is layoffs and bankruptcies. But the Fed doesn’t want that, and goes to significant lengths, often with negative impact on its price-level mandate, to manage this downside.
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To combat inflation in the housing market. A subset of White collar professionals (such as those in Tech, Real Estate, Finance) ended up earning so much that housing became unaffordable as a small but significant minority began buying multiple investment properties https://www.politico.com/news/2021/11/10/rent-inflation-bide... https://www.politico.com/news/2022/12/31/labor-market-high-i... “Tech and finance are taki…
Tech workers are a small portion of workers overall
The top 10% of Americans by combined household income is any household (not income, household) earning ~170k or above. [0]
Layoffs at this point have mostly been within the tech industry only, hence why rates continue to be hiked. Who cares about techies who most live and vote in already dark blue districts. To win elections you gotta decrease inflation in purple districts and red districts with much more diverse economies. (Big reason Big tech started nearshoring in Atlanta, Austin, Nashville, Columbus, and RTP btw - to get some political capital from legislators in Red states)
This is why you see Dems who get most of their support from white collar professionals like Warren and Ro Khanna slamming rate hikes as they negatively affect their core constituents. [1][2]
This is a white collar recession [3] and most Americans aren't white collar. Hence why you are seeing strong job growth in blue collar jobs still [4] leading to even higher rate hikes, because they clearly aren't negatively impacting most Americans
[0] - https://finance.yahoo.com/news/much-money-top-1-5-100000529....
[1] - https://www.politico.com/news/2022/08/28/warren-elizabeth-re...
[2] - https://www.politico.com/news/2022/10/11/jerome-powell-riski...
[3] - https://www.bloomberg.com/news/articles/2022-09-13/tech-layo...
[4] - https://www.politico.com/news/2023/02/03/employment-report-b...