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Comment by howmayiannoyyou | Hacker News Reader

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.

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?

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This argument is like watching multiple Tarot-card readers arguing over tea leaves. Hilarious content. This entertainment is why I come to HN. Everything you said is a guess, but you say it with such sincerity and conviction, as if it could have been written by the new Bing-powered-by-ChatGPT. Good work all.

> Everything you said is a guess

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.

The reason I'm suspicious of these claims is because there's no empirical evidence to support them. I have this pet peeve about news people when they say "the market was up|down today on fears of _" and all the news does it, from Fox to PBS. As if there was some kind of survey attached to every trade asking "Why are you paying more|less for this stock than you were previously?" and the news people are all analyzing this data. They're not. There's no such polling data, and so how could they possibly know the reasons millions of people move in a certain direction on a certain day? They're just guessing. Or else, it's a way to prop up their own credibility. Anything the market does must be due to whatever other stories they've decided to report on today. It's narcissism.

> The reason I'm suspicious of these claims is because there's no empirical evidence to support them.

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?

The problem with that is that there aren’t widespread indicators we are in or going to recession. The opposite is actually true, all the indicators for recession happened prior to the layoffs. At worst the current economic stats are mixed.

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.

>>The problem with that is that there aren’t widespread indicators we are in or going to recession.

You must read different news than I do.

Let's bet on it. How much are you willing to bet you're right and there won't be a recession...

There are never widespread indicators we are going into recession, because once they're widespread, we're in recession, by definition.

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.

Parts of the yield curve have been inverted since March. The headline inversion has been on since June. We were already in negative gdp at those points and came out of it in the 3rd and 4th quarter. Even Campbell Harvey, who has researched the signal since the mid 80s thinks this one is a false positive.

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.

> Tin foil hats are a crutch for a lack of understanding, or a tool for total understanding. Which case applies to you?

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.

> 4. Wages don't go down. Not that they cannot, they just don't

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.

I work for a large SV company and I've had my pay temporarily cut by 5-10% with the promise that there wouldn't be mass layoffs three times over the years. It usually lasts 6 months to a year. It's a pretty standard process; contractors are cut, early retirements are offered and then either layoffs or an across the board pay cut.

> Workers increased salaries were passed to consumers. No problem until consumers stop purchasing.

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.

Nope. Boom bust cycles are a symptom of poor fiscal and monetary management. We are getting better as humans at both things, and we should expect boom bust cycles to get less bad overtime.

Sorry marx and Marxists, but boom bust cycles are not your saving grace to get you the revolution.

That might be a problem for him if he wrote that.

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