Now you create a wave of fear and uncertainty, new hires can't negotiate a remote position, they'll take anything because they need the job. Slowly we go back to where we were and maybe even lower compensation in the process.
tin foil hat on
2. Workers increased salaries were passed to consumers. No problem until consumers stop purchasing. https://fred.stlouisfed.org/series/UMCSENT
3. In a recession cash flow is everything. For most companies labor is the largest variable element of cash flow.
4. Wages don't go down. Not that they cannot, they just don't. https://fred.stlouisfed.org/series/ECIWAG
Tin foil hats are a crutch for a lack of understanding, or a tool for total understanding. Which case applies to you?
I saw GP's arguments less as guesses and more as statistical probabilities. We are discussing layoffs, which is a socio-economic topic after all. So unlike Physics, you should expect probabilistic reasoning here.
Regarding conviction / sincerity, do you see any problem with any of the 4 arguments GP presents? If so, let's discuss that instead of just ad-hominems.
Really? Let's go one by one.
1. "Cuts are companies preparing for recession. We are long overdue for a down cycle and every indicator says its here or on its way." - we are indeed overdue for a down cycle. COVID could have been that but it was short lived due to massive stimuli. And all the traditional indicators (like yield curve, fed's statements) are pointing towards a recession (empirical evidence, as you ask).
2. "Workers increased salaries were passed to consumers. No problem until consumers stop purchasing. https://fred.stlouisfed.org/series/UMCSENT" - there is empirical evidence right there in that line.
3. "In a recession cash flow is everything. For most companies labor is the largest variable element of cash flow." - first part is objectively true. No cash flow, no viable business. And for second part, just go read the 10-Q's. It has labor costs spelled out.
4. "Wages don't go down. Not that they cannot, they just don't. https://fred.stlouisfed.org/series/ECIWAG" - again, GP is cognizant of possibilities and says so. And also provides evidence.
What are you really objecting to?
Similarly, consumer spending has remained incredibly high, and non-tech firms are ramping up still from the covid downturn.
It’s just as likely that tech companies just did a bad job forecasting future growth than they are preparing for a broad based downturn.
Leading indicators are always narrow, and they require some economic knowledge (and some risk) in interpreting them. Rises in interest rates. Yield curve inversion. Drops in advertising spending. Companies cancel major new investments. Mortgage applications fall off. Housing starts fall.
Nearly all of these are happening now. Things like the Fed Funds rate going up usually lead the recession by ~2 years, yield curve inversions by ~1 year, ad spending and capital investments by 6-12 months. Broad-based layoffs and drops in consumer spending usually don't happen until the recession is well underway.
IOW, check back in a year. I'm predicting carnage, and trading on it. You might be right, in which case I've missed out on the growth of a year, but you might also be ruined.
Other indicators that are positive, unemployment, jobs added, new home sales, service growth sentiment (and while manufacturing sentiment is negative it’s trending better than last year).
I’ve been waiting for a blood bath in real estate since last year, I’m still betting on one this spring. I can see that contagion spreading to the broader economy, but I don’t know that it will for sure.
My broader thesis is that the tech companies don’t know what the broader economy is going to do any better than other market participants and these layoffs are not preemptive, they are reactive to bad forecasting.
Does that preclude a recession? No. But the economic indicators do not “all say” a recession is imminent. The picture is extremely muddy, with most recent indicators (sans the yield curve) trending up.
You must read different news than I do.
I read the tin foil hat comment as "I suspect something nefarious, but I don't have any evidence".
Your question, on the other hand, strikes me as being in the class of "are you still beating your wife" types of questions, that are designed as an indictment rather than knowledge seeking.
One thing to consider is how companies lower wages by reclassifying the work. Converting staff jobs into “independent” contractors saves the company a lot of money in benefits even if the hourly rates appear to be stable or even increase slightly.
So certain product lines or businesses can't afford the same number of engineers maybe. But the demand for good software engineers seems to far outstrip the supply so suppression of wages doesn't seem like an appropriate resolution to the problem.
Sorry marx and Marxists, but boom bust cycles are not your saving grace to get you the revolution.
Sorry, that contains a healthy dose of "trust me, all managers are complete idiots who would rather spend a million on hiring new people than spend 10k on retaining their employees".
Managment greatly enjoys the feeling of power they have over people and I don't think it is absurd to say that they are fed up with the current dynamic that takes part of this away from them and are firing people just to create an atmosphere of fear.
But it's been that way forever in tech companies: SWE make enormous amounts of money and can control their work + environment a lot. In the world where corporations function like torture dungeons and managers are running around looking for opportunities to satisfy their sadist urges, how would the boom cycles ever happen where employees get whatever they ask for and 5 years of work straight out of university can get you enough money to retire to a modest life without ever lifting another finger. Managers are all bipolar? Do they have meetings where they coordinate when to lure the people in and then all release their hate at once for maximum effect?
That just doesn't make a lot of sense to me whereas the cyclic nature of the economy and the external stimulus through a) everyone being in their homes a lot more because of the pandemic, and b) money pouring in like crazy because of the central banks explains both the aggressive hiring (during hard upswings and cheap money) as well as the trimming (during downturns and less cheap money).
If it's one company, sure, it may be because of some manager hating people. But pretty much all companies with the exception of Apple (so far, and who also only indirectly employs a lot of their people, so they don't fire them, they just terminate the contracts with their employers, who then fire them)? That would need coordination beyond "monkey see, monkey do".
This has certainly not been true since for ever and is only partially now. Only a small minority of developers make enormous amounts of money and there are plenty of shitty companies that do not give you any control whatsoever.
That being said, I do not disagree that part of it is due to the boom-bust cycle of markets, but yeah, managers "coordinate" in a sense that there is a zeitgeist and a common understanding of what the atmosphere is.
They hired people when it was beneficial (note that I am not using the word "profitable" here) for them to do so and now they are firing because that is the new beneficial thing. Keep in mind that managers do not pay you out of their pocket.
A pure market-driven downsizing wave usually touches the C-level too.
Founders aren't your typical managers. The boom cycle you talk about started with Google paying ridiculous amounts and giving everyone huge nice benefits, and then others had to start matching that to not get all their best programmers stolen by Google.
But today there is no longer a founder led giant who is applying pressure here, so likely things will normalize over time back to 90's early 00's, where programmers were paid more like engineers instead of being a class above.
Unless that changes rapidly, I don't think we'll go to "developers make slightly more than the national average".
You missunderstood, I was talking about founders not following the normal management culture, so they do things like "pay our people twice the market rate so we can get the best people!", no regular manager or CEO would do that, and that is how for example programmers could start earning so much more than engineers.
> I don't think we'll go to "developers make slightly more than the national average
That isn't a quote. I said similar pay to other engineers, not everyone. Engineers makes more than typical people.
> there's a lot of stuff to do where you need developers and only so many developers to do them. If you want yours done, you offer more money so developers do them for you.
This was true in the 90's as well, Microsoft was the richest company on earth yet they didn't pay all their programmers significantly more than the typical market rate for engineers. The fast rise in salaries started when lots of companies started to copy Google in the late 00's.
But that's literally what Wallstreet Banks and Hedge Funds do and have done for decades, and they're the definition of all things not cool by being a cross between MBAs and lawyers. Even when they needed to be bailed out, they maintained their high bonuses because "otherwise you can't keep the best people".
It's also what you'd expect to happen whenever a resource is limited and there's more demand than supply.
> The fast rise in salaries started when lots of companies started to copy Google in the late 00's.
That's because suddenly the demand for developers exploded, not because Google did some magic trick though. In the 90ies, and especially at Microsoft, having developers do stuff for you was nice and all, but it didn't convert into cash quickly and at scale. When the first dotcom boom came, that changed, and suddenly startups paid large sums. Google continued doing so because they needed to grow to capture more of the market / capture more markets.
It may not work out well for the employees, though: once everyone stops pretending to care, the companies will be less worried about someone else giving you a better offer, so your negotiating leverage may just go down the drain.
Empirically this view is valid.
The managers themselves don't even need to be stupid. A bad incentive structure (or even interaction of locally-reasonable ones) might reward bad behavior.
Most people think their own contributions are invaluable, and when they or someone in a similar position get laid off, that challenges that self-image and the obvious explanation is: their perception is completely accurate, but the others are idiots and cannot see it, or they see it, but are ruled by perverse incentives that make them kill the company instead of doing The Right Thing (i.e. keeping and promoting the employee).
It's understandable, but I don't see much value in that line of thinking.
Company being just a big bag of people - at different levels, there are all sorts of different incentives going on.
They don't need to be stupid to make decisions that do not benefit companies they work for. They might just read incentives they operate under right.
My company and other SMALL businesses I know retain productive people through good times and bad. There's some shared pain in those bad times, and shared upside in the good. Why? Because we're human beings, in a small tribe, and we care about each other.
This falls on deaf ears when I'm interviewing and candidates want the prestigious name on their resume, or a game room in their office, or mega-benefits small businesses cannot provide.
I've had two productive employees leave my small business for big corporations. Two came back. One started their own small business.
What does your business do? And are you hiring?
This is the week in which the lab leak theory was finally confirmed in public- something that was obviously likely to be true from the start of the pandemic
You should apologise for trying to paint it in a different way, even more for calling it "confirmed", it's either deceptive or blatantly ignorant.
People seem to forget that when the fed talks about inflation, they are also talking about wage inflation. Raising rates slows hiring, and should slow wage growth. That is the whole point.