👨💻🔻 Tech Downsizing: What You Need To Know
Happy Wednesday all,
We’ve made some changes to the Wednesday and Sunday versions of the newsletter in order to best provide you value as we go through this week in finance together! In replacement of the featured story, we added the Hump Days Scoop which attempts to deliver the details of this week’s big story through a Q&A format.
Congrats to us for hitting 10,000 subscribers to the Hump Days newsletter earlier last week! If you know a friend that you think will find this newsletter valuable, please consider sending this to them! We love coming out with new editions of Hump Days every week so we hope you stick around as we continue to evolve the newsletter.
Enjoy this week’s Hump Days!
- Humphrey, Rickie & Tim
Tweet of the Week
The Weekly Brief
China Says Covid Deaths Top 12,600 and More Than 1B Infected (Bloomberg)
China reports its Covid-related death toll topped more than 12,600 in the week before the Lunar New Year holiday. The data comes after China came under fire for dramatically narrowing its definition of a Covid death and halting daily caseload reports. The true toll could be hundreds of thousands higher given the extent of the outbreak and mortality rates in other countries.
Why Should I Care?
Chinese Covid data shows no new variant but also shows that the virus is spreading fast. As much as eight in 10 people caught Covid since December. As the Lunar New Year gatherings end, it will be crucial to see if there are any spikes in cases.
Biggest Pay Raises in 2022 Went to Black Workers, Young People, and Low-Wage Earners (WSJ)
The median weekly earnings for all workers were 7.4% higher, year over year, at the end of 2022, according to an analysis of newly released Labor Department data. In Black Americans, those employed full-time saw an 11.3% increase. Weekly pay for workers between 16-24 years old rose more than 10% and the bottom 10th of wage earners (those that make about $570/week) saw their pay jump by nearly 10%.
Why Should I Care?
A rising tide lifts all boats. It's a welcome relief to see those who have experienced “decades of pain” in the labor market see the largest jumps in wages.
The U.S. is Massively Underperforming Global Stock Markets (CNBC)
The Russell 3000 benchmark for the entire U.S. stock market is up by 6.3% since October and the S&P is up 4.6%. In comparison, the MSCI World-ex U.S. index has surged by more than 22%, while the pan-European Stoxx 600 is up more than 13%.
Why Should I Care?
Check out this video I posted on index funds recently where I go into how international stocks perform relative to the U.S. in periods of market downturns.
You’ll Find This Interesting
Spotify’s Chief Content Officer, Dawn Ostroff, responsible for signing the rights to Joe Rogan, Prince Harry & Meghan Markle, and Barack & Michelle Obama just left the company following the ~600 employee layoff by the music streaming company. Daniel Ek, chief executive, announced that Ostroff’s departure was part of an effort to “restructure our organization” which likely means a downsizing of its $1B+ podcasting arm which only accounted for 7% of total listening on the platform.
Hump Days Scoop
The Tech Company Downsizing Continues. What’s going on?
Google’s parent company said it would cut its staff by 6% in its largest-ever round of layoffs, estimating the elimination of roughly 12,000 jobs. Alphabet is the latest tech company to shrink its headcount.
What other tech companies were affected as of late?
Microsoft is cutting 10,000 jobs, the largest layoff in 8 years
Wayfair is laying off 10% of its workforce
Amazon said layoffs would affect more than 18,000 employees
Salesforce said it was laying off 10% of its workforce
Lyft said it would dismiss 700 workers, 13% of its staff
Why are all these tech companies laying off so many employees at once?
The tech downsizing is a sign of correction in the tech sector after record pandemic hiring helped onboard hundreds of thousands into new remote tech job openings. The recent cuts signal the pivot toward protecting profit and mark the end of the growth-at-all-costs era in technology.
Google hired aggressively as demand for its services rose during the pandemic and saw a 50% growth in total employee count since the end of 2019. The cuts late last week fell short of the almost 12,800 employees it added in Q3 last year. The tech company saw $17.1B of operating income in Q3 2022, an 18.5% decrease from Q1 2021.
Tech companies are heavily reliant on valuation and raising new money to fund new developments and increase headcount. Given the high-interest rate environment, investors who were once willing to buy into risky, unproven assets, have become more reluctant and have started running to safer assets, taking their money along with them for the ride.
Where are all these tech workers going to go?
While big tech seems to be dominating headlines, traditional companies are also in need of those with programming skills. Industries such as health care, the government, and private companies in retail or manufacturing. As a wave of highly skilled tech workers hits the labor market, companies such as the likes of Walmart could come in and sweep up the new talent.
Should we be worried about mass layoffs if we work in other industries?
The tech sector is a very small slice of the overall workforce in the U.S. and makes up only 2% of all jobs in the economy. Jobless claims still remain low and there are more than 10M job openings across the country.
The risk of layoffs spreading into other sectors is definitely a possibility, so take that into account, but the coverage in the news makes the risk seem outsized for what it actually is.
What We’ve Been Reading
Markets
NYSE Says Tuesday’s Trading Glitch was Due to ‘Manual Error’ (CNBC)
Rich Customers Pull Money From Banks Offering Paltry Interest Rates (WSJ)
Amazon Deepens Healthcare Push With $5 Monthly Subscription (Reuters)
Economy
Businesses See Lower Odds the U.S. is in or Entering a Recession (Reuters)
U.S. Business Activity Downturn Eases Slightly, Euro Zone Back to Growth (Reuters)
Companies Cut Temp Workers in Warning Sign for Labor Market (WSJ)
Government
World
Venezuela’s Inflation Slows to 234% in 2022, Vice President Says (Reuters)
Bank of Canada Raises Rates, Declares Pause to Assess Economic Impact (WSJ)
Chart of the Week
It was a crazy year for the world and the markets in 2022, with geopolitical conflict, rising prices, and the labor market all playing key roles. Here were the top Google searches related to investing in 2022.