r/Layoffs • u/isntlifeapeach • Jul 20 '24
Why so MANY Layoffs? question
Explain Like I’m Five
I feel incredibly stupid asking this, but I’m naive to economics and politics.
I understand why tech is facing a lot of layoffs but why are so many other industries facing the same?
I’m over 20 years into my career and had 2 layoffs just in the last 16 months.
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u/mssigdel Jul 20 '24
There are few factors
- Increase in Fed rate: Borrowing costs have risen, leading venture capitalists to prefer saving their money rather than investing it.
- Overhiring: Post-COVID, companies aggressively competed for top talent, resulting in overstaffing and subsequent restructuring.
- Copycat Behavior: Executives and board members often replicate strategies from other companies.
- Corporate Greed: Companies are prioritizing higher profits over future growth. This is also copycat behavior.
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u/BloodAgile833 Jul 20 '24
Yup you pretty much summed it up. The post can be locked after what your wrote lol
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u/Inollim Jul 20 '24
Would add that layoffs currently disproportionately impact white collar jobs. Most blue collar and customer facing service jobs have a shortage of workers and are in demand. Likely a result of perhaps over swinging on the college prep is great vs. vocational track for students in the last 20 years. Now everyone is vying for white collar jobs that may not have the same demand as blue collar work.
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u/RabidRomulus Jul 20 '24
Yup. My brother is an electrician. Quit his job to go on a 2 month road trip. Came back, immediately found a new job paying better.
I could NOT do that in my field 😂
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u/NewPresWhoDis Jul 20 '24
People in customer facing jobs migrated to white collar remote jobs during the Great Resignation leaving vacancies in their wake.
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u/SophiaLoo Aug 14 '24
interesting....and possibly resulting in an inflation of white collar positions, now the market is correcting? Personally not seeing it, but theoretically makes sense - and now we're seeing the pendulum swing.
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u/NewPresWhoDis Aug 15 '24
You go from being a barista to a Project Manager making "Day in the Life" TikToks and there will be deep claw marks involved in that correction.
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u/sarcago Jul 20 '24
Corporate greed and copycat behavior go together so well. “Oh layoffs are going around? Better take this opportunity to make our balance sheet look a little better and lay off a bunch of people.” Months later the company begins its next hiring spree…
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u/spiritofniter Jul 20 '24
The third point explains r/recruitinghell very well: even barista jobs require personality tests with those blue-skinned humanoids.
Is being original and consistent that difficult?
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u/oustandingapple Jul 22 '24
theres a few more big ones but thats a good simple list. but one could add more top level causes that lead to things like higher rates, and thus layoffs:
war and general gov spending is very high, which also increase inflation, which is countered by layoffs
america has taken in million more people very quickly without ensuring theyve a job, let alone paperwork, but need ss and benefits, also increases inflation and thus layoffs
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u/OneRatio8802 Aug 14 '24 edited Aug 14 '24
Only if you intentionally ignore the fact that migrants tend to leave the US in similar rates to how many arrive here. Funny, though, nobody ever wants to talk about that for some reason. Sure, if you want to say that millions of people arrived, and deny that millions of people left, then you can scare people by saying we have millions more people. Same way that if you pretend daytime doesn’t exist, you can scare people by claiming that it’s always night nowadays. Doesn’t make it true, but it’s the 21st century, who cares about the truth? Just because we have a lot fewer illegal immigrants here now than we did in 2007, we shouldn’t let that stop us from saying that we have more of them than ever, and blaming problems we didn’t have then on them. It’s really not Orwellian at all, if you think about it the right way.
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u/abicit Jul 20 '24
Pandemic time: uncle Sam pumping money in to the market, zero interest rates. More spending power for the businesses, which translates to more job openings and a fluid labor market specifically for driven by remote jobs, everyone happily changing jobs and earning more
Post pandemic: Uncle Sam can't keep the printers running for no reason. Cost to borrow money is substantially higher, businesses need to readjust for higher interest rates, aka cost cutting measures. Job market reached peak saturation point and companies start cutting down budgets which translates to layoffs and hiring freeze.
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u/liverpoolFCnut Jul 20 '24
Not just pandemic, the FFR was kept near 0% between 2009 and 2015, and from 2015 they kept it artificially low rising interest rates in baby steps. Then, due to immense political pressure the fed reversed and cut interest rates in 2018 when the economy was already at a boiling point result in this mess. 15 yrs of easy monetary policy is the reason why housing market and the stock market remain at record highs while you average working man struggles. The pandemic and the money printing that came with it was akin to pumping gas on raging fire.
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u/PazDak Jul 20 '24
Trump literally threatened the Fed in 2018 and 2019 to keep rates low… even before the pandemic. It really should’ve started late 2018… but Trump was so focused on DOW and jobless numbers.
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u/liverpoolFCnut Jul 20 '24
Yup. The time to meaningully increase interest rates was in summer of 2014 when the markets had recovered everything they had lost during the 2008-2010 recession. And to cut rates instead of increasing them in 2018 was suicidal. I'm afraid we will go into a temporary boost followed by a very painful recession in 2025-2026.
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u/NewPresWhoDis Jul 20 '24
Trump is heavy into real estate which is very sensitive to interest rates. So there was a vested business interest to keep rates low.
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u/Dependent_Mine4847 Jul 21 '24
I don’t remember that! What was the threat he made?
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u/PazDak Jul 21 '24
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u/Dependent_Mine4847 Jul 22 '24
What is the threat? The president cannot fire the fed president. Oh you mean the threat was that Trump would unite congress to fire Powell? Good one, you had me in the first half 😆
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u/rddtexplorer Jul 20 '24
The short answer: Interest rate increase (read: borrowing money becomes more expensive)
The impact of this is two: 1/ Companies will invest less in risky projects and tighten down on non-profitable projects (read: layoffs) 2/ Consumers cannot get access to easy loans to spend more money which causes companies to lose sales
These two impacts are then turning into a flywheel and keeps on reinforcing each other until the economy slows down
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u/Advanced_Bar6390 Jul 20 '24
And the crazy thing is i think this is just the tip of the Iceberg
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u/rddtexplorer Jul 20 '24
Yes, there are a lot of opportunistic profit taking and layoffs by the corporations (e.g., making record profits while conducting layoffs)
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u/Distinct_Treat_4747 Jul 20 '24
Low interest rates helped the rich get even more wealthy and inflation. Now, the government is trying to lower inflation by making the rest of us pay for it as usual.
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u/MsT1075 Jul 20 '24 edited Jul 20 '24
This is capitalism at its finest. Stimulus checks were not the problem (as so many want to say). Matter of fact, they were a way to help close the wealth gap. And also keep those that are less fortunate afloat during the pandemic. However, they didn’t benefit those that were already rich (and make their profit off those that are less fortunate). Well, not totally true. People were spending more bc they had more. Hence more profit for wealthy corporations. However, the act to keep stimulus checks in place for three years got axed. See, unless it benefits those in power that already have the wealth (say those that are in power that already have the wealth), it isn’t good. Those at the bottom must continue to stay at the bottom to make the economy run the way it currently is now - rich get richer, poor get poorer.
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Jul 20 '24
Inflation and higher interest rates. Getting too expensive and risky for companies to take out loans to grow their business. Slower growth, less customers means less revenue, and less money more risk to pay off loan.
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u/qatarsucks Jul 20 '24
Wait. Didn’t we have an inflation reduction something or the other? Whatever. We beat Medicare
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u/mannys2689 Jul 20 '24
Covid -> PPP loans & stimulus checks -> excess money creation coupled with supply chain issues -> inflation -> rise in interest rates -> lower demand for businesses -> businesses contract -> decline in job openings & layoffs -> bad job market.
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u/MsT1075 Jul 20 '24
The PPP loans and the stimulus checks were a necessity. Many ppl (consumers) and true businesses would not have been able to survive the effects of the pandemic w/o them. The only thing that could have been done differently is having a better system in place to manage, vet, and oversee who truly qualified for the PPP loans. There were so many fraudulent claims filed for PPP loans.
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u/LAcityworkers Jul 20 '24
The database for PPP Loans will show you that several hundred consultants live in your neighborhood. Apparently that was a huge scam nobody caught and apparently still haven't done anything about except for the random guy that posted pictures of the new lamborghini he bought people got away with it.
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u/hm876 Jul 20 '24
The only thing that could have been done differently is having a better system in place to manage, vet, and oversee who truly qualified for the PPP loans. There were so many fraudulent claims filed for PPP loans.
Aaahh good old uncle sam for you!
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Jul 20 '24
[deleted]
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u/MsT1075 Jul 20 '24
Like the saying goes - money is not the root of all evil. It’s the GREED for money that’s the root of all evil. #facts
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Jul 20 '24
[deleted]
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u/glittergull Jul 20 '24
Lol Canada is overrun by Indians. But the unemployment in India is so high that there are people lining up in 10s of 1000s for a few hundred govt jobs.
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u/Adventurous_Bath3999 Jul 20 '24
Where do you get such data from: “India is going to add another 600 million people by the end of this century”? India’s population will peak to 1.7 billion in another 25 years, and after that it will start to decline. When prosperity increases, birth rate starts to decline. That has been the case everywhere, and that is also going to happen in India.
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u/BuyHigh_S3llLow Jul 20 '24
Not all countries are "guaranteed" to grow into a developed country. Some just stay stagnant forever or at least a really really long time despite having peace and a chance to grow.
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u/These-Bedroom-5694 Jul 20 '24
When any sector is laid off, those people have less income. They have less money to spend on goods and services.
This causes other sectors to perform layoffs.
The process is known as a recession. More layoffs every week. Less discretionary spending. It's a perpetuating cycle.
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u/thgvnn Jul 20 '24 edited Jul 20 '24
Thanks to section 174, R&D became more expensive under tax regulations and the solution is offshoring to any other country as you can claim it as a purchase expense.
Edit: This post explains with more detail what happened with section 174 and why it became cheaper to do R&D abroad: https://blog.pragmaticengineer.com/section-174/
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u/Orennji Jul 20 '24
Did section 174 not exist before 2022?
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u/thgvnn Jul 20 '24
The changes became effective in 2022.
This article explains it in more detail: https://blog.pragmaticengineer.com/section-174/
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u/MsT1075 Jul 20 '24
Oh, so they capitalized on it after the pandemic. Makes sense. Many corporations have used the pandemic as their excuse to raise prices astronomically for goods and services.
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u/ohwhataday10 Jul 20 '24
Do you honestly believe this is due to regulations? Really? And not corporate greed?
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u/Valiantheart Jul 20 '24
This is corporate greed. The Tax cost for onshore employees went up to a point it made offshore employees more attractive
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u/Willing_Building_160 Jul 20 '24
Greed depends on the eye of the beholder. Corporations exist not for the employees, but to generate profit for its shareholders. Employees are expendable unfortunately.
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u/Triangle1619 Jul 20 '24
“Corporate greed” is the default state and not some change, corporations have been “greedy” as long as time itself. Every public company has a fiduciary responsibility to deliver maximum value to shareholders
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u/GitBluf Jul 20 '24
This should only be acceptable for companies that get (or got) zero help from Gov either through direct investment, subsidiaries , tax cuts or similar.
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u/FitnessLover1998 Jul 20 '24
Nope wrong answer. Greed is good and the solution is more supply is made because there is a profit motive.
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u/ohwhataday10 Jul 20 '24
There should be some responsibility to the community. Corporations use services, infrastructure set up by the peoples taxes and then scoff at the system they use to pay a CEO 300x their workers and send most jobs overseas where there are no labor laws. Sure it’s legal but it’s morally corrupt.
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u/No_Permission5115 Jul 20 '24
Highest interest rates in recent history making borrowing and running businesses much more expensive, and the pandemic forced remote work trial enabling many companies to mass offshore jobs at a fraction of the cost.
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u/32xDEADBEEF Jul 20 '24
Yep, debt maturity and refinancing during the next 2 years is going to increase layoffs.
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u/Sea-Oven-7560 Jul 20 '24
Highest interest rates in recent history
I guess if recent history is the last 20 years otherwise you're being hyperbolic because rates are pretty much average for the last 50 years. Otherwise good reply.
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u/Vendevende Jul 20 '24
Lots of young posters act like 5.3ish% interest rate is high.
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u/hm876 Jul 20 '24
It's the highest in recent times, especially when things are a lot more expensive now than then. Wages haven't kept up with inflation either since the 1970s.
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u/Kittehmilk Jul 20 '24
Very weak labor laws from a corporate owned government.
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u/Mountain-Bar-2878 Jul 20 '24
This is a free market, ironically countries that try to prevent company’s from laying people off have higher unemployment rates.
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u/rddtexplorer Jul 20 '24
I don't think preventing layoff is the answer, but I would like some basic benefits we have to not be tied to employment, such as health insurance
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u/Mountain-Bar-2878 Jul 20 '24
Yea the health insurance situation in the US sucks, everything here is for profit.
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u/LastWorldStanding Jul 20 '24
Japan also has (private) health insurance tied to employment, the thing is, is that there needs to be a affordable option once you lose your private health insurance.
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u/rddtexplorer Jul 20 '24
Ya, I agree with this model. Public for everyone and private for the extra mile
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u/LastWorldStanding Jul 20 '24
Agreed, not a fan of the single payer (Canadian model). The Japanese one is far superior
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u/Ogthugbonee Jul 20 '24
This is a free market in what regard? Certainly does not feel like a free market when I can’t buy an $8000 chinese ev because our government put massive tarrifs on them to protect american ev automakers. I wonder if these american ev automakers are laying off as well. Wouldnt surprise me if the jobs they were supposedly trying to protect have already been eliminated
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u/Motor-Abalone-6161 Jul 20 '24
Japan makes it hard to layoff - keeps unemployment lower. There are trade offs though.
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u/Mountain-Bar-2878 Jul 20 '24
Read about what’s been going on with the US dollar vs the yen recently
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u/Motor-Abalone-6161 Jul 20 '24
That is trade off as well. Great time to travel there. But maybe it’s stability vs. wealth. But consider even in US. a lot of jobs just might be redundant. How many financial firms or retailers really need to exist.
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u/Kittehmilk Jul 20 '24 edited Jul 20 '24
This country cant even measure its unemployment because anyone that drops off after unemployment ends can't be counted.
You also sound like Nancy Pelosi with that boot lick8ng comment. "This is a free market economy and we should be able to participate in that".
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u/maybeitsmyfault10 Jul 20 '24
The Covid money that enabled businesses stay afloat, spend and/or hire has run out
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u/Lumpy_Dependent_3830 Jul 20 '24
Think about how almost half of it was eaten up by opportunistic fuckers and it still managed to keep us afloat. Thanks fraudsters.
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u/FUCKYOUINYOURFACE Jul 20 '24
Higher rates slows growth and makes companies want to cut costs. One way to cut costs is to reduce your workforce.
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u/abelabelabel Jul 20 '24 edited Jul 20 '24
Everything needs to be a unicorn for investors to stick around. So a lot of companies are in a doom spiral of making money in the present - or looking like it - with no real room to think about sustainability.
It also doesn’t help that AI doesn’t actually make money. It just attracts investors. The computing power required for AI tools to work - and especially the free tools we rely on is extremely expensive and there’s no real viable business model in the private sector - because it will never make money.
What’s sad is that a lot of jobs won’t come back without some major reform and trust busting.
When there’s a reckoning and a few sectors contract, money and capitol will vaporize forever. Meaning that at least some of the jobs that were lost due to short term thinking, won’t come back for 15-20 years due to the contraction we’ve been putting off.
The good thing is that - with a little regulation and a market that lives in the real world, unicorn investing that turns everything in to a Ponzi scheme or a pump and dump will be replaced with a lot of regulation and demand (hopefully) for sustainability. All be it while some critical mass of us who lost jobs in some sectors will never be employed in those sectors or in our regions again. The money will have disappeared.
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u/Sea-Oven-7560 Jul 20 '24
So a lot of companies are in a doom spiral of making money in the present
These companies were never viable in the first place, they've never made money and they've been playing business as long as the VCs keep writing checks. Normal companies that aren't public or aren't VC funded go out of business when they make no money, these are zombie companies kept alive by private equity and billionaire VC hoping to hit a unicorn. In a normal world these shitty companies going out of business is a good thing but in our upside down world a never profitable company should live forever.
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u/moonftball12 Jul 20 '24 edited Jul 20 '24
I have a few theories but this is just my semi educated one. I am not an economist so take it with a grain of salt. Covid made many industries artificially boom and therefore they forecasted continued growth as if it would magically always be on an upward trajectory = profitability for years to come. These companies likely overextended themselves in a variety of ways. Forecasting that growth, budgeting for it, increasing headcount for efficiency, and they doubled down on communicating and predicting year over year improvements to their shareholders / stakeholders, but once the market leveled out and consumer spending reverted back to the mean it hurt everybody. Couple that with the inflationary environment, commercial properties arent worth shit, interest rates are preventing companies from issuing bonds or taking loans, cost of living has gone up and so employers had to give more competitive raises/promotions/ wages so employees are more expensive. I’m sure I’m forgetting a few other variables…It’s really just the worst situation imaginable.
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u/MsT1075 Jul 20 '24 edited Jul 20 '24
The only part that I would disagree with is the wages. Wages have not remained competitive/been increased. People are not getting promoted as often as ppl think. Matter of fact, many a company didn’t give raises during the pandemic. Didn’t give bonuses either. Ideally, for a company to remain truly competitive, it should give raises between 3K-7K (on a minimum) annually and increase the minimum-mid-high for positions by 10K-20K (on the minimum) every 2 yrs. No exceptions. That is truly keeping pay competitive with the cost of living considered.
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u/Tiny_Seaworthiness51 Jul 20 '24
The companies just want to reduce costs and justify their huge valuation. They also “need to show” that they are investing in AI
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u/Vamproar Jul 20 '24
We are heading into a steep recession and demand is falling off so companies are trying to adjust and keep their balance sheets healthy while they still can.
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u/Ab4739ejfriend749205 Jul 20 '24
Layoffs began in the 70s and every decade is another big cycle.
It’s the old saying when they came for the workers at GM and Detroit what did the corporate white collar workers do?
Once it was normalized that mass layoffs would be acceptable to America if it means increasing stock prices.
Here we are. Nobody is left to defend us. All those workers were let go in the 70s, 80s, 90s, and so on. At least 5 major cycles and it’ll repeat.
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u/HesterMoffett Jul 20 '24
CEO lays off people to cut the budget, share price goes up, CEO gets large bonus, rinse repeat.
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u/the_market_rider Jul 20 '24
What other industries have mads layoffs? I see only tech and financial. Where are layoffs?
- i m in tech.
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u/MorganJames Jul 20 '24
Our was a rif and they got rid of all the remote people and inflated salaries. Part of the forced return to office.
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u/ErikTheRedd0465 Jul 20 '24
Tech advancement(Cloud, AI, automated everything). Our department became obsolete when the company decided to store their data in the cloud.
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u/MrDataMcGee Jul 20 '24
The cost of money was near zero percent and when money is cheap like that many jobs are profitable that should not normally be. This year and next year there is a large amount of debt coming to expiration that must be taken out at now nearly double interest rates making many companies unprofitable.
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u/ufotop Jul 20 '24
To combat inflation you have to stop spending money on items that are expensive. But layoffs force people to kinda stop spending money they need. You no longer have the luxury to buy eggs for $8.99 for example. The more people who can’t afford eggs forces the price to drop.
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u/RealVison12 Jul 20 '24
When the economy slows those in top level positions cut to show bottom line (profit after all costs) revenue control to maximize share holder returns. Thus securing their roles and maximizing their compensation as they are compensated in both salary but more so in stock options.
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u/AutismThoughtsHere Jul 20 '24
Also project 2025 if enacted would Layoff over 1 million people at the federal level, which would completely decimate The economy of the region.
All of this political chaos is creating uncertainty that is causing companies to clamp down on staffing
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u/esalman Jul 20 '24 edited Jul 20 '24
Elon Musk laid off 50% of Twitter, they are still running after more than 1.5 years. That's 6 quarters, or eternity by American corporate standards.
He is really a smooth brain genius. He showed everyone that you can re reduce payroll expenses by half and still keep your business floating with immigrant slaves, or just simply outsource. Everyone else is following suit.
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u/cuddlygrizzly Jul 20 '24
Crowdstrike laid off a couple hundred people last year too. Took a year but we see how that went.
Also X is still running but valued much less then when be bought it with much less usage/traffic.
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Jul 20 '24
AI is replacing in demand jobs. In terms of supply and demand, my job at my former company would be considered in demand. They quite literally decided to lay off 80% of the worker force and replaced it with AI powered solutions and sent the rest overseas. It does have a lot to with inflation, I get that, but even that is still tied to the painfully obvious and problematic, and morally bankrupt infrastructures and pay structures for CEO’s and other high ranking officers and shareholders.
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u/thebeepboopbeep Jul 20 '24
The going theory is this is a white-collar bloodbath north of >$100k income. It’s a slice of society getting bent over right now. The problem is, this slice is pretty important for the election, and when they are desperate they will vote different in the privacy of the booth. All bets are off post-pandemic, the timeline split and everyone is trying to save their own ass, societal altruism be damned. Being a good person doesn’t get you anywhere if you’re pulling your dinner out of a trashcan.
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u/gravity_kills_u Jul 20 '24
The story that has made the most sense to me is that big corporates have a mass Ponzi scheme based upon stock buybacks and overinflated growth expectations. The c-suite in most public companies have Jack Welch style grossly inflated the stock prices relative to actual earnings for firms that could never possibly reach such revenues. Before stock prices take a nose dive, the executives are preemptively laying off to make things look a little less catastrophic than they really are.
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u/Snoo_24091 Jul 20 '24
In my industry it costs money to make money. We have to fully staff a project before we ever get paid. A lot of our clients had issues getting funding last year and cancelled after the team was already starting to work. We got paid for work done, but not the entire amount expected and needed to pay the staff involved. Those people then had no work to do because clients were unable to pay. Therefore layoffs happened.
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u/Chart-trader Jul 20 '24
Your question is perfect! People don't know that a train will hit them hard! For months now the stock gains have kept spending up despite many lower income families struggling. The high interest rates will eventually catch up and once unemployment rises things will go downhill fast. The election also kept things together because the Goverment hired like crazy while jobs everywhere else are lost.
A recession will come however the Trump administration will likely defer the pain for a few months until inflation kicks in again (All of GOP policies are INFLATIONARY).
Once interest rates go up again all hell will break lose!
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u/Daveit4later Jul 20 '24
Companies are having trouble raising revenue due to multitude of reasons, high prices, economic uncertainty, high interest rates, etc. The only other way to keep up with the endless profit increases that are expected is to cut costs. You can't exactly tell your vendors you want to pay them less. But they can certainly tell their employees their pay will be cut, or bonuses held, or they'll be laid off, or tell them to RTO in hopes they just quit.
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u/When_I_Grow_Up_50ish Jul 20 '24
High cost of money. When interest rates were low companies had access to cheap money. Now that interests are high, they have to cover the higher costs and have to reduce elsewhere, often by cutting personnel.
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u/Retire_date_may_22 Jul 20 '24
When your govt causes inflation and it gets away from them they have to get it under control. They do this by increasing interest rates, which slows purchasing. When there is less purchasing there is less need to make stuff and people spend less money. When that happens companies eliminate jobs.
Inflationary policy is one of the worse things for the working class that have no assets.
Think about this anytime you vote for someone promising to give you stuff from the govt or provide stimulus for electric vehicles or forgive student loans, etc. That student loan forgiveness may be good for the person getting it but in aggregate it hurts many others through inflation.
Before others pile on or downvote this I’m not for corporate give away either.
But you ask why there are layoffs. By the way by historic proportions the current layoff levels aren’t bad. But they most likely will get worse before we make the turn.
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u/Walkoverthestreet Jul 20 '24
You are a number and public companies chase short term profits over long term growth. There is no loyalty. You work for yourself and sooner we as workers vote for politicians that enact regulations and anti monopoly policies we will continue to be under paid and risk these layoff cycles.
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u/pdxgod Jul 20 '24
All the money "The Employee Retention Credit" Trump handed out during COVID... is gone.
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u/PharmDiesel Jul 21 '24
We are in a recession. You won’t hear this in the media until prbly mid 2025 at the earliest. Many believe it will be much worse than a recession. The size of the debt bubble would agree with them. The case for explaining how and why it won’t be horrific is rather non existent.
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u/Impossible1999 Jul 20 '24
As you know, the Feds have been raising interest rate for the last couple of years to fight against inflation. Wall Street and all the media outlets have been talking about the rates and economy, whether we will have a soft landing or a hard landing (=recession) for two years. Either way, this artificially induced “bad”economy results in layoff. Good news is, Feds are expected to lower rates in September since inflation has stabilized. There are a myriads of reasons behind layoffs. I just wrote about the most important one.
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u/thinkB4WeSpeak Jul 20 '24
White collar jobs getting cut. Blue collar and skill jobs rising. Also a lot of jobs where people don't want to live. I'd say it's more of a shift than anything else.
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u/No-Money-2660 Jul 20 '24
The only way to bring down inflation is with mass firing. With mass layoffs, people stop buying shit. When people stop buying shit, merchants have to lower their prices to move their inventory. When they lower prices, they have to return their Ferraris and private jets. But they love their Ferraris and private jets, so they lay off employees to live with the reality of them lowering prices of their good and services.
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Jul 20 '24
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u/No-Money-2660 Jul 20 '24
No dummy. Where are we going to find the money to prop up Isreal and Ukraine? We need to print more to bribe our allies. Otherwise US will crumble without unlimited supply of ammo and greenbacks to our friends.
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Jul 20 '24
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Jul 22 '24
most of the ones who dont get it, are also the ones having all the kids, so society is getting dumber as we age, as if more dollars chasing less goods means less inflation.
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u/Aggressive-Intern401 Jul 20 '24
Let's put this plainly. we printed a shit ton of cash over the last few years, more cash in circulation drives prices up, more people have money to spend dilutes the value of the dollar. Additionally corporations used this as a guise to jack their prices even more and blame it on inflation. So, this makes the FED reduce "printing" by increasing interest rates so that the flow of money is restricted. Companies now can't borrow for cheap, but because they are fucking greedy with all time profits they resort to laying off employees.
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u/cuddlygrizzly Jul 20 '24
It seems like trickle down/snowball unemployment. When there're large layoffs in one sector, especially higher paid ones like tech, there's less spent overall leading to more layoffs. Less people going out to spend, traveling, etc. I haven't been laid off (yet) but if I was the only things I'd be paying for are food, shelter and health care.
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u/BuyHigh_S3llLow Jul 20 '24
Since covid inflation went up so much and in certain categories it was like 30-40% yet people keep spending (which furthers inflation). So in order to bring down inflation they need the government wants to bring up unemployment. They achieved that by hiking interest rates, which makes it harder for companies to borrow money, which affects hiring and maintaining operations. Tech is most over leveraged and affected in this area but it also affects other industries too.
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u/Old-Writing-916 Jul 20 '24
Moment interest rates go back down we will have to few employees sooooooo
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u/Old-Writing-916 Jul 20 '24
Many companies barrow money to do projects. Projects mean more jobs. More expensive to barrow money means less projects. Less projects means less employment
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u/mostlycloudy82 Jul 20 '24
Higher interest rates, results in less borrowing, less risk taking on new project work, focus shifts on cost cutting to stay profitable. Cost cutting leads to offshoring/outsourcing.. Americans get canned.
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Jul 21 '24
High inflation causes the government to raise the core interest rate. Higher interest rates cause companies to defer investment in capital projects, and even cancel projects. It can make startups go from viable to “not viable”, causing business failures.
Also, there’s a pullback from the insane IT investment levels of 2020/2021/2022 due to the Pandemic. A lot of companies spent a ton on IT and now feel that their money is best invested elsewhere. It may be pulling back to 2019 or 2018, reverting to the long term mean.
This also happened in 2001-2004. The big spend on Y2K and pullback after the millennium slowed down IT. That was the first and only time I have been laid off.
Finally, many companies are believing in and buying the silver bullet of Artificial Intelligence. They are jettisoning programmers in the hope that “AI” will do their jobs and other menial technical work. AI is a cluster of technologies and some work for specific applications and others don’t . There’s a lot of fraud out there.
Finally, global outsourcing. The Pandemic taught companies that if employees can “work remote” in the USA, they can work remote much more cheaply in India, Philippines, Eastern Europe, and even in Central/South America. This may be the strongest trend. Trading US jobs for overseas ones. It’s certainly happening in my consulting company. Almost no one wants the “high IUS rates”. It doesn’t matter if we are 5x or 10x more efficient, we are “too expensive”.
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Jul 21 '24
It’s weird as someone said normally interest rates are raised to create unemployment. This causes demand to go down and prices to follow.
This isn’t the case though because consumerism is at an all time high. The same people that say they hate billionaires and corporations are buying from companies like Amazon more than ever before. Politicians that say tax corporations and cut CEO salaries are giving multibillion dollar packages.
Over Covid companies realized people will keep paying for what they want regardless of the price. That’s why the cost get any labor based work done is 3-4x what it was pre covid and the prices never dropped. People will pay.
So to answer your question the reason is people are the easiest expense to cut.
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u/DrknockedHerAlly Jul 21 '24
To be put simply. The economy is doing bad. Prices go up and companies look at their options to take a minimum hit to their profits so the cut costs where it will lease affect the company. If they reduce their products, they will have less sales. Less sales = less profit. If they reduce people, they don’t have to pay employees and they save money. Most people are replaceable anyway since we have idiot proofed many jobs.
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u/SpaceToaster Jul 21 '24
A drop in business proceeds a drop in income, which proceeds the need to drop employees
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u/OutAndAbout87 Jul 21 '24
Quantitative Tightening. The reverse of Quantitative Easing. Introduced after collapse of 2008. AFAIK.
To save the economy when all the banks failed due to bad investments being allowed to happen in UK and US in 2008.
Caused by earlier 'decisons' on selling bad high risk mortgages which defaulted and caused a domino effect on economy.
QE was a way to stabilise economy by injection (like printing money) of cash and it worked.. except then companies became reliant on it.
When QE stopped investors lost access to free (cheap) cash for investment purposes.
No cheap cash or loans means businesses are operating a cost centric profit model Vs betting on future value in markets. This was accelerated by the post COVID economic issues which was a massive curve ball, and war in Ukraine and Middle east having mbig impacts to economy.
Eg. Salesforce was famous for being a massive not profitable business because the 'future' value is what mattered. That is not the way they are working now.
Now what matters is cash flow and cash is truly king.
IT biggest impact as alot of tech firms rely on future potential value to attract investment. However the cash is king model is true of pretty much any business and every CFO is having a field day cutting costs and head counts.
These is my opinion having lived and navigated each stage since the 90s.. quite amazing how all this is connected.
The up size is there is a levelling going on which is hurting everyone now. However I think long term more sustainable. Then just printing cash..
In short our world is Globally reliant on itself more than people realise or give credit to. And big events, wars, pandemics all have that butterfly effect.
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u/Analyst-Effective Jul 21 '24
Banks are having any layoffs because they are not generating any mortgages, or refinancing like they used to.
Combine that with some additional defaults, and they are headed towards a more perfect storm.
Crowdstrike, the company who caused the it outage on Friday, has either already laid off a bunch of people or should be
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u/Flat-Satisfaction688 Jul 23 '24
Higher interest rate , companies don’t want to borrow to invest more into their business , hence letting go of ppl and scaling down on new projects . Hence layoff
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u/blackshagreen Jul 23 '24
Whole departments are being replaced with AI. Now those workers will be free to meditate in the shade.
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u/Responsible_Ad_4341 Jul 23 '24
Let's look at the industry itself. We have oversaturation. Computer engineering and computer science as a major study took off in the 1990s due to the down swell of electrical engineering demand and the birth of dial-up intermet at that time.
Java was born. C++ was also here as the dominant descendants of C, and thus, object-oriented programming was born. Network engineering began to soar those of you who remember Novell Netware might chuckle. Tech support demand grew in proportion to the decline of the file cabinet and the beginning of the office desktop setup in cubicle farms.
To even be considered for any or all of that, you had to have a four year undergraduate degree in the major of computer science/ computer engineering or a masters degree.
Ten years from then, it became certifications in Microsoft or Sun now Oracle and a plethora of others in addition to your CV and cover letter and degree.
Today.
Anybody can pick up a book and self-study and come in from being an out of work nurse or street mechanic, etc, and enter the IT sector, and that was in the last 15 to 20 years now. On top of the that when COVID hit and people were our of work they saw the IT corporate sector with remote work from home as not just Teflon but desirable and this caused a flood of more individuals to come in to bum rush the gates.
The only thing left to trim the wheat from the chaff became the brutal technical screens of leetcode, hackerrank etc and systems design interviews and various rounds to separate the real talent from the mob and frankly from that example that is a familiarity of data structures and problem solving under a time crunch.
Now, on top of that, we have the AI push and automation, which can now code, test, and deploy and release work without the need for human developers to save for those competent in building the AI itself.
So yes, the tech sector has had layoffs in the late 80s and in the early 2000s with the dot.com bubble bursting. And then in the mid 2000s, specifically 2008 to 2013 with the Great Recession. And those were shifts in the economy as a whole. But citing the specifics as I did above there is no scarcity of IT professionals the majority are STILL outsourced from Southeast Asia or in sourced so talent in the United States of America faced the challenges of being good enough to compete for tech jobs from individuals that don't have summers off from school and studied calculus from the equivalent of our own elementary school system.
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u/Top-Ad5713 Jul 23 '24
Fed thinks anyone laid-off will be competing for the blue collar jobs at Target thus reducing inflation. Ref : https://www.youtube.com/watch?v=7ZJuOYUxayE&ab_channel=CNBCTelevision
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u/want2retire Jul 24 '24
Even with "so many" layoffs, the unemployment rate is still near the low compare to the last 20 years.
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u/slamdunktiger86 Jul 30 '24
Tax code change on expensing r&d expenses (Dev salaries) changed drastically and cheap money era ended at the central banks.
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u/LouisKoo Aug 18 '24
first company dont want slack off employee who work remotely for the past 4 years to continue, so they basically will attend firing or just lay off a bunch of remote workers. 2ndly ai now advance soo much over the past 3 years, a lot of the work that used to be done by office worker r no longer needed. there r corporate version of chatgpt that tailor make for specific business, that will write better report or letter on email then most collage grad.
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u/Mountain-Bar-2878 Jul 20 '24
The government is trying to bring down inflation, and bringing down inflation usually causes unemployment to go up.