Salesforce cut hundreds of employees Monday
cnbc.com
cnbc.com
The people who lose their jobs, in turn, are forced to cut their spending, contributing even more to the ongoing revenue slowdown at companies that sell to consumers.
The service providers who see their billing examined with a microscope and who are told that new projects are now on hold, in turn, find themselves forced to cut their own spending on people, services, and facilities, contributing even more to the ongoing revenue slowdown at other companies.
The office buildings who are given notice of lease terminations, in turn, find themselves forced to cut their own spending, contributing as well to the ongoing revenue slowdown at other companies.
The more every company and consumer cuts spending, the less money all companies and consumers earn. This unpleasant state of affairs is called a "recession." When it's really bad, it's called a "depression." It's no fun. Many unprofitable companies and many consumers without savings are at risk of financial ruin.
Yes. This is the reason for having a better social safety net. There's no reason a normal business cycle should "ruin" normal people that did not take excessive risks.
> There's no reason a normal business cycle should "ruin" normal people that did not take excessive risks.
And this is why I get so frustrated when I hear things like "Well business owner(s) take all the risk so that's why they get all the reward (profits, or most of it)". Bullshit. For smaller companies this is more-so true but not even then is it always true. I'm not sure how many downturns or mistakes have to happen followed by layoffs for the general public to grasp this but I don't anticipate people wising up anytime soon. In a number of these layoffs we hear about "Well we misjudged the market" or "The trends didn't continue the way we thought and we over-hired". Instead of tightening their belts (less profit for owners/shareholders) the answer is always to just jettison people until the books "balance".
I own my own (side) business and I have family members who own full-time businesses, I'm well aware of the risk (and debt) we have taken on but for larger companies the top brass (and shareholders) seem nearly completely insulated from any pain. Compare that to places that have profit sharing with employees which can go down if there is a downturn/etc, this is a much better way to handle it. I'm fine sharing in the risk (which I'm doing just by working for someone, they could fire/lay me off tomorrow without warning, that's a risk) if I'm also sharing in the reward. I'm also fine with the "reward" (profit share) decreases in "bad" times versus laying off a bunch of people. Some companies do this much better than others but I really wish companies were either forced to share the rewards and/or actually feel some pain when they make bad decisions. I think we all know the people responsible for over-hiring don't actually face any repercussions for their mistakes, instead it's the people they hired then laid off. And no, paying severance or feeling bad about having to lay off people isn't really "pain" in my book.
Having a "better social safety net" is sort of a way to force "profit sharing" in a roundabout way and I would greatly appreciate it if losing a job didn't mean loss of healthcare and/or a way to put food on the table, pay rent, etc. I know from personal experience that having a good safety net (aka, my parents) makes a huge difference. Not that I play fast and loose with my money (I have an emergency fund that I could run on for 6-9+ months that I've built up) but you always have a little voice in the back of your head saying "You aren't going to end up on the streets". Not everyone has that and I'd love nothing more than for everyone to experience and have that confidence, it's what allows you to take risks (sane ones ideally, like starting your own business) knowing that failure will not ruin you.
puts up soapbox
A social safety net is always there.
it's really hard for a lot of people to build up savings here.
Right now, interest rates are squeezing the market.
We're seeing (hopefully) a correction to a more sustainable level of business.
As a response to the pandemic, the US Treasury spent ~$6T more than it collected in taxes: ~$3.2T during the Trump administration and ~$2.8T during the Biden administration,[a] and the US Federal Reserve reduced short-term rates and purchased $5T of treasury and agency bonds, flooding the market with liquidity and lowering long-term interest rates to their lowest level since WWII.[b]
As always and as ever, investors flooded with treasury checks and ultra-cheap money engaged in an orgy of speculation that would make even the most shameless drunken sailor blush. Crypto is perhaps the most prominent example of it. Trading in meme stonks would be another example. Pokemon Pikachu cards trading for $5M may be the silliest example. Or maybe the silliest example was all those smart people who came up with clever narratives to justify stock market valuations that otherwise look... unjustifiable.[c]
As the speculators threw money around while we all muddled through the pandemic, the world's supply chain system was hit with two massive shocks: (1) the pandemic, which is still limiting the availability of many items (e.g., iPhones made in China), and (2) Russia's war in Ukraine, which triggered a global food and energy crisis (e.g., there isn't enough grain being exported to feed the entire planet).
Both shocks are fueling inflation, prompting the US Treasury to cut spending and the Fed to increase rates and withdraw liquidity from financial markets. Increasing rates and withdrawing liquidity are very painful methods for reducing inflation, but they are the only methods that have been shown to work. As money started becoming less cheap to borrow and less easy to find, businesses and consumers started spending less -- first gradually, then "suddenly."
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[a] https://fred.stlouisfed.org/graph/?g=WdPZ
It wasn’t just online companies that benefited by changing consumer habits as people where stuck at home with little to do browsed social media and ordered food delivery etc. Setting up remote options across many industries had many similarities with the pre Y2K investments and a wave of modernization efforts. That followed by supply shortages which pushed massive investments to build more robust supply chains etc.
Food prices are inflating, so if we get enough people unable to afford food, prices go down.
“Victory”
I think you can apportion blame for stuff like that. And the guilty are insulated from the consequences of their actions, so I don’t agree they share in the pain.
The fed isn't doing this because they want cheaper shit from china. They're doing it to keep inflation under control. A result of making money more expensive is lower shipping container rates, but that's not the primary goal. Do you have any better ideas for stopping inflation?
Increasing the cost of borrowing decreases economic activity by essentially making everything more expensive on credit. Many businesses use credit facilities to finance ongoing operations throughout the year and their ability to afford to operate their business will go down, requiring them to employ less and attempt less business. This reduces inflation by pulling capital back from growth and investment as well as into savings facilities. But the other side is it induces a recession, increases unemployment, and decreases wages. This is worse than inflation IMO - if you make less money how is that different than things costing more? The supply of money might change the nominal price of something and hurts fixed income folks, but as wages are elastic as well as prices unless inflation is coupled with decreased wages and employment whats the relative difference? Further consumption based economies burn money supply down quickly if the economy is able to meet demand.
By reducing the cost of shipping and improving shipping capacities any excess cash would be consumed by having supply meet demand. That can be achieved by lowering interest rates which stimulates capital investment in supply side expansion and facilitated demand by lowering the marginal cost of credit facilities.
Easier said than done. How do you do this without driving more inflation in the meantime? If supply chains are constrained, deploying a bunch of oil drilling equipment is going to make it worse.
>This is worse than inflation IMO - if you make less money how is that different than things costing more?
What's bad about inflation goes beyond just "inflation was 10% so people are 10% poorer". Inflation hinders trade and financing (why would you sign a 5 year contract when you don't know what prices will be in 5 years?), discourages saving/investment, and adds inefficiencies throughout the economy as everything has to be constantly repriced. Also, failing to contain inflation when there's an expectation of a certain inflation rate leads to higher borrowing costs (for both private and public lenders), because lenders don't want to be wiped out by inflation.
>That can be achieved by lowering interest rates which stimulates capital investment in supply side expansion and facilitated demand by lowering the marginal cost of credit facilities.
That's absolutely bonkers. There's already too much dollars chasing too few goods, and your solution is to unleash even more dollars?
Not only be concerned with it when it begins to impact wages.
https://www.wsj.com/articles/transcript-fed-chief-powells-po...
Had a decade of asset inflation, that was fine. A quarter or two of wage inflation and everyone loses their minds.
Note I’m not saying don’t deal with inflation. I’m saying inflation is caused by bottlenecks in supply meeting demand. Stimulus increased demand, and that increased demand can be met by suppliers but the cost of shipping in all dimensions is very high historically. Removing bottlenecks and expanding economic throughput also solves the inflation we see without everyone being miserable.
Obviously the Fed can go overboard. But the economy is no longer based on fundamentals and an inflationary spiral would be a major problem. I can't blame the fed for taking the action they are.
The overall economy is doing quite well right now and it’s not obvious if things will improve or tank over the next few months. Despite officially low unemployment rate the actually important employment rate is only ~60% demonstrating a reasonable but not excessive amount of slack in the labor market.
economics is not a single company
this is the tail of feds interest rate raise cutting down investment. it will last a while, but the economy doesn't yet seem unhealthy (well except some specific bubbles, but those have been there a while and if they pop will pop because they were bubbles, not because the secondary trigger)
The only thing I'm not so sure about is the health of the economy. While all macro stats look great so far, they don't yet reflect the wave of layoffs we're seeing in sector after sector.
We may be going through a mild recession overall and a brutal one in bubble-land. Regardless, it will feel horrible to anyone younger than 35, who has never experienced a recession since joining the workforce at most ~15 years ago.
Big business and financial firms have been signaling a belief in a downturn for a while now -- including while posting about record profits.
Not to oversimplify but I find “government programs” to be a good answer to basically any “tragedy of the commons” problem such as spending less during a recession.
> account executives
...you mean "sales", right?
> At the end of January it employed 73,541 people.
“…employees Monday”,
“…January”
Is this grammatical? Is it coherent? Or was this generated with GPT-3?
Yesterday, Salesforce reduced their headcount.
It doesn't seem difficult to parse at all.