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Comment by mtw | Hacker News Reader

It's not just projections or worries. Companies have real hard data, such as sales pipeline, inventories, orders etc. If your sales pipeline is down, inventory is stocking up, and your warehouse is idle compared to a year before, it is a manager's job to lay off employees.

a few interesting reports: https://www.reddit.com/r/StockMarket/comments/aydpbu/first_h... https://twitter.com/paulkrugman/status/1110161228507348992

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I think their point is that all of that hard data may be a result of self-fulfilling prophecies of other companies cutting back their business because there's a general sense that a recession might be coming.

I mean, if you're running a burger joint and fewer people are coming in to buy burgers, why would you continue to order the same amount of beef each week?

I get that the real world more complicated than this, as forecasting can be done for months out, but businesses can't magically fix the economy by continuing to spend the way they have been because it isn't sustainable.

The problem being pointed out is that fewer people aren't coming in to buy burgers yet, but because the store managers heard rumors of a recession, they preemptively fire employees and order less meat, which puts fewer dollars in their employees pockets, which means less spending power per person on average which means people actually do spend less, even though there wasn't actually anything wrong in the first place.

Based on what I know about American consumer spending habits, people basically spend whenever they can (which is why consumer debt is so high).

It's when they "physically" can't spend that it starts to slow down (slowing income, access to credit).

That's exactly right. Recessions are not behavioral patterns. They happen when borrowers can no longer borrow more to pay the interest on their existing debts.

Yes, that's the traditional understanding. We're talking about something new, something possibly different.

More of a positive feedback loop than a self-fulfilling prophesy.

Yay proper use of positive feedback loop.

Yay proper use of a positive feedback loop.

This could leave you flat-footed when the economy picks back up or you realize it was a 'blip', so it's not an easy/clear decision to make because you see one or two numbers going down.

Not to mention, laying off people has a non-negligible impact to real peoples lives.

This is the "bullwhip effect": https://en.wikipedia.org/wiki/Bullwhip_effect

It's a stupid fucking mentality pervasive amongst the American corporate MBA set. It treats people as disposable and is usually not in the company's best interests. It's a short term boost to a company with long lasting and often disastrous implications down the track.

True but there's also a lot of unknowns and variables in any business and mangers have to guess sometimes. In that sense mood and atmosphere can matter if you're on the fence.

>... it is a manager's job to lay off employees.

I feel awful for those people whose lives have just been disrupted so. I’m particularly empathetic because, as a foster parent, I know very well what may happen to some of those families.

I've never been a manager or had any role in laying someone off. But I've been laid off myself and know plenty people who get laid off and suffer the consequences, some quite severe.

So I sometimes wonder, how do these managers who lay off people sleep at night? I mean they are just doing their job so that THEY themselves don't get laid off. And next I wonder, who are these rich rich people who want more money so that they hire people to lay off other people?

But I guess that's life.

I've had to lay off a decent number of people over the course of my career. The way I have always justified it is that I'm keeping the company healthy, and allowing far more people to keep their jobs in doing so. I'm sure there are cases where restructuring was done to the detriment of the business. I don't believe I've personally participated in any of those.

That is part of the reason I took those jobs. Someone was going to do it, and I felt that I could do it in a way that kept the business healthy and was as respectful and careful about the humans impacted as possible (ensuring severance, having 1-1 conversations with every impacted person on my team, etc).

For context I was an executive brought in to restructure software companies after they were purchased or tucked in by the LBO side of a PE firm.

In theory it would be better to cut everyone's pay than to lay off some people. But this brings lots of complications.

https://www.econlib.org/archives/2013/09/why_dont_wages.html

A lot of these morale problems happen after layoffs as well. If the layoffs are deep enough it makes sense to move the entire company to a different city and completely reboot. In those situations I've seen as much as 90% of the company churn in the course of the year. Once the dust settles it's basically a new company and can feel like a high growth startup.

Would be interesting to take a vote from the employees. Would they rather take a collective paycut or have x% chance of getting laid off?

And the best employees, who can find a new job even during recession, will leave.

There's more to a job than pay rate. If the best employees leave because of a recession-time temporary pay cut, maybe the company culture was rotten and the company deserves to go down!

You lay people off so that the company doesn't go bankrupt. Going bankrupt ruins more peoples' lives.

How does a profitable company justify layoffs then?

To avoid becoming unprofitable? You don't wait until you're on the verge of bankruptcy to take action.

True in some cases. But we've also seen plenty of public companies who are profitable but still lay off people for improved cash flow/stock price, which means more bonus for the few at top.

Because the work isn't needed. They arguably should pay workers more so workers can weather a future layoff or furlough, not pay people to come to work and do nothing.

Layoffs are the price we pay for stable employment for some people. Otherwise, we all get to be "consultants" scrambling for the next gig, basically.

Unstable employment is the price we pay for stable employment?

Laying people off is almost never fun. I say almost because sometimes there are people who make everyone around them absolutely miserable for no reason, and in times like that you get to feel like the good guy or gal. Most times though it's a gut wrenching, horrible thing to have to do. You make friends, despite warning yourself to keep a professional distance, you try to limit the fallout when you can, and you know that you're probably next. A lot of times you don't sleep well at night. Sometimes you're tempted to warn people. At the end of the day you're still human. Aside from sociopaths who don't have the ability to feel empathy, it's hard for most people and some people give these hard decisions as the reason sociopaths are often in roles where hard decisions that impact people, it's a benefit for them.

Businesses aren't infinite sources of money. Money should be spent paying people to do useful work, not paying them to produce products no one wants. Rich people spend money, supporting jobs. Layoffs aren't the problem here, inequality of income is the problem. A person's number of hours worked per lifetime is not the important variable, income per lifetime is.

Regarding the yield curve tweet, I'm pretty well acquainted with that whole theory since I listen to The Indicator from Planet Money podcast, and it's a favorite topic of theirs. I was going to note that it generally signals a recession when it's inverted for a whole quarter, but then I read the Tweet.

And it's about how the lower than usual rates it's currently at matter for what it says, which makes sense.

Then I noticed it was Paul Krugman making the observations.

Any prior points I had no longer seem worth adding now. ;)

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