Obsidian Market Update 2/24/2022
Layoffs in the Tech Industry
The numbers for January 2023 are in:
- Inflation => 4% on an annual basis
- Unemployment => 4%
- Federal funds rate => 5% to 4.75% (as of February 1)
- Nasdaq => up 10.6%
- S&P 500 => up 6.18%
- DJIA => up 2.83%
The pace of inflation is slowing, the low unemployment rate is holding steady, and increases in interest rates are smaller. The Nasdaq and Dow Jones had their best January since 2001 and the S&P 500 since 2019.
And yet, the tech industry has laid off thousands of workers. What’s going on?
Tech Layoffs by the Numbers
Roger Lee is an internet entrepreneur who has been tracking layoffs in the tech world since March of 2020 by company, year, number of employees and industry. Here’s his list of the biggest employee layoffs in the last several months:
- Alphabet / Google: 12000
- Meta: 11000
- Microsoft: 10000
- Amazon: 18000 (8000 on 1/4/23 and 10000 11/16/22)
- Salesforce: 8000
- Dell: 6650
Let’s put these numbers in perspective. First, as a percentage of each company’s workforce, the layoffs represent:
- Alphabet 6%
- Meta 13%
- Microsoft 5%
- Amazon 2% and 10%
- Salesforce 10%
- Dell 5%
Second, between 2019 and 2022, these companies hired thousands of employees. The percentage change during that period was:
The Reasons for Tech Layoffs
Tech companies’ costs of doing business have gone up due to inflation and interest rates. Consumer demand has fallen as stimulus money dries up and prices increase. In response, companies are refocusing on core services (PayPal, Microsoft) or higher-growth areas (IBM, eBay, Amazon), correcting over-exuberant hiring (Alphabet), or scaling back in anticipation of worsening economic conditions (Spotify, Stripe, Salesforce and Dell).
More to Come?
Jeffrey Pfeffer, a professor at the Stanford Graduate School of Business, attributes tech workforce reductions to “copycat behavior” and says that “Layoffs do not solve what is often the underlying problem . . . ineffective strategy, a loss of market share or too little revenue.” If Professor Pfeffer is correct about copycats or CEOs continue to restructure for a new economic landscape, look for more layoffs in the tech sector.
In his bestselling book, Four Thousand Weeks, Oliver Burkeman argues that only since industrialization has leisure been viewed “merely an opportunity for recovery and replenishment for the purposes of further work.” (pg. 144) Prior to that time, “leisure was the center of gravity, the default state to which work was sometimes an inevitable interruption.” (pg. 145).
In a 2020 survey, 79% of workers reported experiencing recent work-related stress that manifested as cognitive weariness (36%) emotional exhaustion (32%), and physical fatigue (44%).
Viewing leisure as “the center of gravity” rather than as a remedy for burnout may require a seismic cultural shift, but we can draw a line between work and leisure. Some people use a mental “shutdown” by putting work issues in a mental drawer and closing it. Others create a physical break by changing clothes, “commuting” (walking) around the block, taking deep breaths, or leaving devices off during non-work hours.
When you find the strategy that works for you, your brain and body will thank you.
News Too Big to Miss
On Tuesday (2/21), we welcomed the clients and staff of Integrated Financial Strategies, LLC to the Obsidian family. To read the full announcement, please click here.
How We Help
We believe that collaboration yields the best results with you, within our team, and with other advisors, such as accountants and attorneys. Recently, for example, an attorney asked us to run financial forecasts for one of his clients going through a divorce. We used the Lifestyle Protector Process™ to assess this person’s financial needs and objectives and project how a range of settlement offers could affect her. With this information, this attorney was able provide his client with data-based information and use it to protect her best interests.
This is just one of many examples of how we work with other professional advisors to produce the best results for our clients. If you would like us to collaborate with your other advisors, please don’t hesitate to contact us.