That is the true underpinning of the economy right there. If everything else remained the same but rate is at 2% steady there is probably going to be a hiring crunch like we had in 2021.
Even though the macro economy are not bad or just fine, that still can't justify the crazy hiring those companies did in the last 3 years, thus the lay-offs.
On top of that, we have been in booming cycle since 2008, which is a long stretch, some adjustment is due.
Now, it is only anecdata. I am in IL. My household is above average in terms of income for US and my state. We are struggling ( not as much as so many other Americans, but I can't say I am comfortable say.. buying a new car or remodeling kitchen or even taking a vacation ) and it is not like we are throwing money at random indulgences and we did not even start school for our kid yet. By all metrics I should be in a comfortable enough position ( and I guess I am by comparison ), but to me outlook is choppy. And it is not just the boom/bust cycle. I am talking real systemic issues that will take both massive tax hikes and services reductions, but that would not be a popular message to take so no one talks about it.
I remember working sub $20k job. I remember being bumped to $30k ( ~US median? ) and I can't even begin to imagine anyone having to live on that today.
In short, I agree.
I disagree. The only way to even begin thinking about selling it to the public, which happens to include moneyed interests is 'shared sacrifice' ( similar to how a war effort would be sold ). In pure mathematical terms, we really should be doing both already. We don't because things did not get bad enough yet, but once it starts, it will be a little hard to stop. Shock therapy is necessary to get things under control. And the longer we wait pretending it can be 'managed', the worse it will be later on.
<< I think more of a re-allocation of where capitol is going is the cure.
From where to where? I don't automatically disagree, but 'entitlements'(depending on how you define them ) are somewhat protected from touching and 'defense' is even harder. Re-allocation is not going to happen, because even current allocation was a result of heavy compromises.
I disagree based on the information provided so far. If you have math to back up either point, please share. Right now, we are still running US on continuing resolutions suggesting that balanced budget now is just not possible. Something is wrong and it needs to be corrected before it gets much worse.
You actually posed a solution here not a disproof. Yes all this requires selling changes to the public and under a social message. One doesn’t need math to know this, it is intuitively true.
> from where to where
I already answered this.
> re-allocation is not going to happen because even the current allocation was a result of heavy compromise.
So anything that requires compromise cannot be undone? I’m not tracking your logic here.
I think you are looking for more evidence to backup my suggestion. See 1930s Germany as example where this model was followed and resulted in one of the greatest economic turnarounds of all time.
> inb4 muh nazis and Holocaust Doesn’t disprove the economic turnaround that transpired.
I am convinced, just about anything can be done given enough effort, time and money. That said, how much of those would have to be expended to undo current compromise status quo? I personally would venture a lot more than most people would be willing to give in exchange.
<< See 1930s Germany as example[..]
Um.. yes, because US just happened to fund that recovery ( and of entire western Europe ) via Marshall Plan. Who, exactly will fund US recovery? I am not sure if you noticed, but central banks have been looking around for an alternative to USD[1] so further debt binge may not be an actual option soon.
This brings me to the original point. Drastic measures will eventually need to be taken. If those are taken now, they will be much less painful.
<< inb4 muh nazis and Holocaust Doesn’t disprove the economic turnaround that transpired.
I am not sure this adds much to the conversation. I will ignore it for unless you think it is relevant. If so, please elaborate.
[1]https://www.cnbc.com/2022/03/22/countries-may-want-to-divers...
Post war Germany was hallowed out and the nation is a husk of what it once was, basically a US vassal state.
If you would like to rebut, please give me the 'good policies', 30s Germany implemented. I worry that may you have the 'national socialism' part confused at best.
<< Post war Germany was hallowed out and the nation is a husk of what it once was, basically a US vassal state.
Somewhat accurate. How would explain the Nordstream debacle then?
edit: I decided to pre-empt it a little. I am not interested in discussing whether fascism was left or right wing ideology. I had this argument before it gets ridiculous fast. I am going to bow out should it happen here.
Why not? Cause the current ruling class frowns up it?
> I am going to bow out should it happen here.
Then the system propaganda has worked fully. You police your own speech.
I will expand a little on the why so as not to look like I am being difficult. I am actively avoiding the conversation I mentioned not because of propaganda, fear thereof, its impact or even because I police my own speech. I avoid it because it is largely pointless. For better or worse, both major parties in US noted that you can make anything work well if you compare the other team to nazis. For that reason and that reason alone, you will see constant bickering whether fascism is a left or right wing ideology, which manages to completely miss the point, because it does not rely on two poles of US politics ( that likes to keep things simple for people ) for its origin. It is like trying to put a square in a round box. It can be done, but nuance will be lost.
<< Why not? Cause the current ruling class frowns up it?
No. Because it is a bad idea. It is difficult to put in words how bad an idea it is, but I will say this. For all my beef with current system, at least it has a degree of predictability and stability to it, which is more than most periods that came before it. It is pretty selfish, but I would like that state to continue for as long as possible. Proposed solutions will not make for a stable society.
edit: removed opening paragraph. not necessary
Agreed, I think this serves a common purpose as other generalized propaganda on the subject. The idea is to poison the well concerning any good-faith discussion of national socialism such that people self-moderate and dismiss the idea prima facie. In this very thread, I pointed to the economic recovery in pre-WW2 Germany which was undeniably facilitated by a shift to nationalist, socialist policies. When I did, you dismissed the idea immediately due to "facism" - announcing you'd withdraw from the conversation if indeed national socialism was the topic.
> No. Because it is a bad idea. It is difficult to put in words how bad an idea it is.
Precisely, I've seen this pattern time and time again. It is prima facie a bad idea, but proof cannot be articulated. In such cases, the fallback is often (not accusing you of this) to attack the person suggesting the idea rather than the idea itself (ad hominem). I agree predictability and stability are ideal characteristics, but only in scenarios where there are other positive characteristics. Predictable and stable misery is a pretty bad state to be in. I think we can agree that the current system has many faults. One of these faults, I think, is that the system has optimized the wealth and opportunity for a very few in number. I believe the nation requires a shift in philosophy away from globalist, hyper individualism, and towards an inward looking (nationalist) stance that optimizes the wellbeing of the people (socialism). Such a shift in national philosophy, as was seen in pre-WW2 Germany, has shown an ability to correct for the excesses and decay of a globalist and individual culture, improving the outlook dramatically for the citizens. By many measures (num of children, unemployment, inflation, wealth, life expectancy) national socialism improved Germany dramatically.
What policies from 30s Germany would you argue US should adopt precisely to get it out of current set of trouble?
Your atlantafed link shows unweighted wage increase peaking at 6.7% in August 2022. In what way did wages outpace inflation?
Just this week we saw a jobs number that absolutely rofl stomped the consensus expectations. At the same time the credit card number came in ism services business purchasing came in 35% over expectations and new orders were way over expectations as well. Businesses are out there doing something!
You could watch in real-time as the markets all did a collective about face on what the narratives should be.
I frankly don’t know if we are in a good economy or not, but there are lots and lots of indicators we are, so saying someone is on “copium” because they espouse that view says a lot more about your biases than theirs.
The situation's super-weird and it's evidently hard for people used to being able to easily spin the narrative one way or another to adjust to whatever the hell this is. It's definitely not the case that all indicators look great, but damned if the economy's not still trucking along.
But I can see being critical of a ceo saying it’s the macro environment when other industries are doing really well. They clearly mispredicted the future, that’s different than a broad economic decline.
Since most of the companies doing 6-8% layoffs are concurrently reporting revenue growth, it isn't clear why they feel their future revenue is going to suddenly decline. It also isn't clear why, if they truly expect a decline, they'd continue to buy back shares or issue dividends. Seems like they'd want to keep that cash on hand, if they actually had concerns about the future, and weren't just using the social contagion as an excuse.
This is clearly not true, although it is probably the most important thing.
Interest rates matter if a company financed expansion using debt. Cost of capital matters if your plan is to grow through VC and you're not yet profitable. Changes in these areas can change a company whose books add up to one that doesn't.
I haven't personally seen companies taking out operating loans using adjustable rates. Have you? If rates are fixed, then a company's expansion plans may need to slow or stop, but that's not the same as the company contracting.
> Cost of capital matters if your plan is to grow through VC and you're not yet profitable.
Which does apply in Gitlab's case, I think, but does not apply in most of the cases we have been seeing of 6-8% layoffs made at profitable companies, many of which are concurrently doing expensive stock buybacks or issuing dividends.
If your business model depends entirely on 0% interest rates, then a 7% layoff is probably not enough, you have a dead company walking. But 6-8% is what's popular, so that's what we get.
Actually, those are all traditional signs that the economy is overheated. They're not signs that the economy is doing poorly, they're signs that the economy is doing too well.
> Record high credit card balances
Nope, it's back to normal. [0]
> record low personal savings
Well perhaps. If you take a hyper-zoomed-in-view of this chart [1] then I can see how you'd have this takeaway. But contextually this is in the period right after a 1-2 year period where rates were consistently 3-5x above the average. Consumers drawing down on personal savings right now is a natural release from all the savings during covid, and in fact is a positive economic indicator because it injects a lot of cash into markets and that goes straight to corporate balance sheets. Probably a good time to be hiring, not laying off.
> 40 year high inflation
1. This is often good for companies and businesses, because it means that they get a free pass to essentially lower pay across the board for every single employee. While on the revenue side, since "everyone is raising prices" they get a free pass to adjust pricing UP to account for inflation, and then some! So in the end businesses are probably pretty happy with how inflation has played out this last year, particularly because...
2. The actual pain experienced from inflation is more connected to the area under the curve. If we had sustained 40-yr high inflation for several years, then yes that is truly disruptive to an economy. But an inverted "V" like peak (which is clearly what we have the last year [2]) means a single shock, but after that everything resettles. We're clearly in the resettling period, as current inflation as of December is only 6.5% and dropping quickly. That may feel painfully high for millenials accustomed to decades of near zero inflation, but merely newsworthy for another time and place.
> rising interest rates and no sign of the fed stopping
As I said in another comment, perhaps this is a reason for a small startup with a short runway and highly dependent on investor cash and bank credit to layoff employees, but Microsoft and Google? They're flush with cash and are not dependent on credit markets to survive. These layoffs are clearly about "showing fiscal responsibility" and "trimming fat", and not at all about a mathematical response to economic conditions.
As it is, there are plenty of signs that the fed will be stopping soon. Already rate hikes have dropped from 50p to 25p, and markets are indicating a complete end to rate hikes some time later this year.
> Housing affordability at its lowest point
One would think that raising interest rates would mean the housing market would totally seize up, right? In fact nearly the opposite has happened. Construction, housing starts, and housing completions are an a contradictorily high point right now, particularly in one of the most affordable segments: multi-unit housing! These giant real estate companies are not worried at all about interest rates and are instead plowing ahead adding tons of supply to the market.
Lenders are getting creative about how to get around high interest rates. Sellers often buy-down the buyer's interest rates. Adjustable rate mortgages actually make sense for once and are getting more popular. California is finally solving the NIMBY housing crisis and zoning high-density. Outlook in housing in general is pretty good right now.
[0] https://tradingeconomics.com/united-states/consumer-credit
[1] https://tradingeconomics.com/united-states/personal-savings
[2] https://tradingeconomics.com/united-states/inflation-cpi
If you're suggesting people worked two jobs out of desperation, we need to see the evidence.
If the "solution" is a bunch of layoffs, it's just going to compound the problem. The solution is all these companies that aren't actually dying need to raise wages to match all the recent inflation.
That's surprising given money is reportedly much less cheap now. Any citations?
>>> “While this is necessary to address the challenges we’re
>>> facing today, I do not make this decision lightly,” said
>>> CEO Bob Iger, "
From the same article
>>> ...the company released better than expected financial
>>> results for the fourth quarter of 2022. Disney revenue in
>>> the quarter rose 8% to $23.5 billion, edging past
>>> estimates of $23.4 billion
Truly they are facing major challenges /s
https://www.cnn.com/2023/02/08/business/disney-earnings/inde...
And the best way to capitalize on high revenue is to cut costs--layoffs.
https://www.cnn.com/travel/article/disney-raises-ticket-pric...
They're running out of franchises to milk, and making something new and original is not in their corporate culture.
They brought some of the accountants from Hollywood to the bay area and now all equity not owned by the founders or investors mysteriously becomes worthless right before a liquidation event.
None of these figures matter a damn. Gross figures aren't profit. And you need to adjust for inflation. Avatar 2 doesn't even show up in the top 25 all time when you adjust for inflation.
If the prod cost for Ava2 is $250 as reported, and marketing is roughly the same, then you're down to $1.5B before all the theaters take their cut. It doesn't mean that Disney netted $1.5B.
But theater attendance is way down either way - and streaming make have cannibalized other revenue streams more than people think.
It's debatable whether these films feel like "sequel direct to DVD" or not, but I don't think it's debatable that audiences are watching them.
https://www.adweek.com/lostremote/nielsen-top-15-stranger-th...
The problem with streaming is that you can stream repeatedly (believe me I know that) without incurring anything additional to Disney but costs. In the "old days" going to see Encanto in theaters would have cost our family easily $80+ - now that's just the cost for Disney+. And we would have gone, but why bother when it's available to stream?
They also cannot milk for MORE than the streaming cost/yr. I've noticed a lot of Encanto merchandizing on the clearance aisle, but I don't really have a way to track that.
I think Disney intentionally took a lot of family-oriented films and kept them out of theatres during covid (reminder Encanto released in 2021) to avoid the optics of creating super spreader events where children are at the forefront. In their conference call they mention going back to theatrical releases.
Their parks and live experiences made a huge profit last year: $29 billion in revenue, and approximately $8 billion in operating profits.
Their tech-heavy streaming division was the part that lost money: over $4 billion for the year, almost entirely offsetting the gross revenue made by the the film division from theatrical releases.
Yep, that's right: the only part of Disney that lost money was the tech-focused part.
I m european so we see work in a way more controlled, mutualized way were companies are expected by the state to provide for the citizens, but the success of the american model is that they disagree with us and are way more liberal with all of it. Should they change to copy us ?
You can drive a car a long way even if you never change the oil, but eventually it catches up with you. You can't conclude that an employee wasn't necessary if the company doesn't crash and burn soon after he was laid off. The negative consequences may not be manifested until years later.
Yeah, it feels the most charitable interpretation for the companies that say that is their CEO read doom-and-gloom predictions last fall, and hasn't opened a newspaper since.
My employer just put out good numbers for 2022 and what look like positive growth predictions 2023 -- they're not laying anyone off, but they're cutting budgets and letting go of contractors (mostly very good ones), which will really hurt our ability to deliver and maybe even negatively impact stability. I've heard that meeting the budget is the priority, even if the actions needed to do that are illogical. It makes no sense.
They are therefore panicking about the near future (and rightly so), this is what they mean by 'The current macroeconomic environment is tough'.
No, I don’t think so. 6.5% [0] is still an absurdly high rate compared to the past 30 years. It is nowhere near tame and may still fluctuate quite a bit.
[0] https://tradingeconomics.com/united-states/inflation-cpi
Core inflation actually fell last month [1], and the producer price index has been very low the past several months [2]
[1] https://tradingeconomics.com/united-states/core-pce-price-in... [2] https://tradingeconomics.com/united-states/core-producer-pri...
It’s not a non-issue to people trying to buy things.
Agreed. But pretty much every business is taking a hard look at their SaaS spend and are making cuts where possible.
The bean counters love it because it looks like you have an infinite revenue stream
You are correct in everything you say in your first paragraph. That said, it's fair to say that "sharply rising interest rates" are also part of the macroeconomic environment. You can say that it was silly for all these tech companies and investors to think the free money spigot would go on for so long, but the key driver for all of the fall in tech company valuations and employment levels is rising interest rates.
> If there are problems, they are Gitlab problems, not macroeconomic problems.
Yet literally every big tech company I can think of has had similar levels of layoffs. If these were Gitlab-specific problems you wouldn't expect the slowdowns and layoffs to hit everyone.
I think that is the point: it does not feel accurate to say that "macroeconomic conditions are tough" or that you expect slowdowns while recording record levels of revenue, and yet company after company after company is using these imaginary tough headwinds to justify laying off 6-8% of staff, often while paying dividends or issuing stock buy-backs.
If it really is rising interest rates, then be honest. Say "due to rising interest rates, we are going to lay off 7% of staff... while buying back stock using our record profits."
And I don't understand why you would care about layoffs from the tech industry (of all people) anyway, it's one of the best industry today and will probably for a while still (forever?). Maybe one of those engineers can help his local tech shop instead.
I find people's tendency to generate outrage from nothing other than headlines to be very annoying.
Hearing how bad things are going to be for more than three months as they continue to not, in fact, be that bad, I started to wonder if they even believe what they're saying.
And if they do, that's fine, but then why use the money for buybacks/dividends rather than saving it for the downturn they're sure is coming?
Over hiring then laying some off shouldn't be a catastrophe in tech.
I also think people would have less issue with these layoffs if CEOs didn't make it sound like a short term critical business decision while being worth hundreds of millions of dollars.
They could be, or not. They seem to issue a preview release every two weeks or so[0], so they are clearly making progress on something.
While Apple did have a much smaller increase in headcount over the last few years, I wouldn't use Apple as an example while we're still in the midst of everything. In December, people were touting Google as an example of one of the layoff-proof companies. I didn't trust that logic, and I don't trust the logic that Apple is somehow immune when they're so closely tied into the tech industry. For example, I'm theorizing that a non-trivial part of their profits comes from supporting the developer ecosystem (who else buys max-spec Macs at scale?). Regardless of the underlying reason, mass layoffs and tightened budgets are going to dry up B2B profit streams.
But if you're Microsoft or Google? You're profitable. You're bringing in money hand over fist. Technically the high interest rates might benefit you because now you have more options of what to do with that giant pile of cash: you can lend it out and get a decent return!
So high interest rates maybe does justify layoffs in some cases. And even perhaps for GitHub specifically, though I'm not sure I understand the complex dynamics of how it generates value for Microsoft anyway...
Okay, but it has to mean more than “we wanted to do layoffs” because it’s being used to justify or explain why they wanted to do layoffs.
Many might just take the opportunity because "everyone else" is doing it.
That doesn't really mean anything other than they are all riding the same wave.
What it means to someone being laid off is far more than the challenges in finding another place.
Plenty of fish and a rich dating scene out there. If you are dumped for dubious reason, would the argument that it isn't a problem at all to find someone else stand to not touch on the reasons?
Plus given the power dynamic at play, don't you think the debate should go on with the reasons for what almost look like a centralised decision making power deciding when millions people should be let go despite no correlation with poor individual performance and even business performance in many cases?
Where did you get the notion that millions of people have been laid off?
Not that it is the canonical source of truth, but according layoffs.fyi:
- 2023: 100k people laid off at 332 tech companies
- 2022: 160k people laid off at 1044 tech companies
source: https://layoffs.fyi
Almost every CEO that uses this line is essentially trying to avoid saying “we foolishly overhired during 2021 and are correcting for that”.
Saying that would mean the CEO is admitting that they made a misguided decision.
Zoom to max.
Everywhere? Have you been down a grocery aisle? The Ukraine war is likely to continue disrupting global food, fertilizer, energy, and raw material supply for years.
Boomer retirement is crunching capital. Finding investment will likely only get harder for the next several years.
China may be on the verge of a demographic, manufacturing, and political collapse.
Stock your pantries.
Having lived through that hell I laugh every time I see this statement.
aka
> Interest rates are high and I am worried about getting my next round of funding or meeting minimum payments on corporate debt.
Because an overwhelming number of corporations take advantage of tax laws that make interest debt deductible, every interest rate hike leads to firing people and decreasing business investment, just to stay profit margin neutral.
If you want to change this, it would really help to change the tax laws. https://news.bloombergtax.com/tax-insights-and-commentary/en...
Curiously they IPOed in 2021 and report no debt. Perhaps they intended to borrow and got sidelined by rate hikes?
- Oil supplies are tough so we are raising gas prices (we know we can get a few weeks/months of crazy profits and blame it on the energy crisis)
- Supply chain issues are tough so we have to tighten out belt (excuse to not give out raises/bonuses)
- The macroeconomic environment is tough, so we gotta lay off 7-10% (we have wanted to trim the fat for some time and now we have the perfect cover)
Funny how it is always slow to go the other way (slow for gas prices to come down, wages to rise, and rosters are expanded).
Lots of companies are using this and layoffs at other companies as an excuse to cut down their work force, which they (uncommonly) hadn't done for years (which might mean never for young companies). My guess is also that this is more acceptable to share holders because it allows companies to put some money in the bank in case a recession actually arrives. Being transparent about this would be more honest than blaming it on "tough macroeconomic environment". At least severance packages look pretty neat and there's lots of jobs out there still for software people. Hiring is getting a little easier for smaller companies too.
I’m not saying Biden is only one that does this, but the economy sucks, and those think the spin put out at the state union means otherwise, are like those who admire the naked emperors clothes.
This is not smoke and mirrors, it's a seasonal adjustment. Without these seasonal adjustments, the jobs report would be completely and utterly useless. We always lose a massive number of jobs in January after the holidays, each and every year. Removing that seasonal variation from the jobs report is the only thing that produces a useful signal, and it's something we've been doing for your entire life, so there's no difference in the trend.
The economy is quite good. Record low unemployment, near-record high job openings, very low long-term unemployed, low part-time for economic reasons, rising wages, modest inflation over the past six months, record-high corporate earnings. There are some areas that are weak, particularly manufacturing, but it's just not even remotely true that the economy sucks.
The macroeconomic environment is more volatile now than any year in recent memory. It is objectively tough, and cherry picking random indicators which aren't core drivers of the economy doesn't prove terribly much.
I think you would have to go back to the 70s and 80s to find similar precedent. If you look into the origin of the Volcker rule, you'll see exactly the kind of messiness the world might be in for.
We had such situation in socialist Yugoslavia in the 80s, just before it collapsed. Most people just "went to work" without doing anything useful or producing anything valuable while still getting fairly good money. Government kept printing money while increasing foreign debt to keep people content as opposed to let unprofitable companies close so that people get laid off but hopefully regroup into more profitable ones. It lasted for some time, but when it finally came to an end it was really ugly.
I feel sorry for everyone that gets laid off, but perhaps that is better than the alternative.
Sure, if you cherry pick the indicators. There's a pretty big one you're tiptoeing around: the Fed Funds Rate has gone from 0.25 in 2022 to 4.75.
> I do not have insight into Gitlab's customers, or the current state of Gitlab's business.
Well, that is to your detriment, both as a persuader and decision maker. Gitlab is publicly traded, and their fiscal year ended Jan 31, so you have a wealth of data you could be consulting to make the case. Yahoo Finance shows[1] they have zero debt, and margins at negative fifty percent -- for every dollar take in they lose a dollar fifty.
It's not too hard to imagine the company has been losing money while money was cheap to grow marketshare versus GitHub, but now that rates are up it will be much harder to issue debt and pay it back. It's not to hard to paint Gitlab as a company in transition from loss leader to profitability by cutting costs and reducing long term investments as they become more expensive. And I think describing that as a response to macroenvironment conditions is appropriate.
[1]: https://finance.yahoo.com/quote/GTLB/key-statistics?p=GTLB
[1]: https://personalmba.com/best-business-books/ [2]: https://www.amazon.com/dp/1118735846/
Talk about cherry picking indicators—the federal funds rate isn't even an indicator. If you sincerely want to look at the data without cherry picking, please look at the top 10 US macro indicators [0].
[0] https://www.investopedia.com/articles/personal-finance/02021...
> The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.
[1]: https://www.newyorkfed.org/markets/reference-rates/sofr
Why would I want to look at the SOFR? That's the epitome of cherry-picked data. I just sent you a list of common economic indicators, and you're willfully avoiding them, which doesn't bode well for your argument. If anything, you should be referencing the yield curve, which is an actual economic indicator and has recently inverted. That would illustrate your point much better.
I'm asking what your preferred metric for interest rates is. Apparently you want to look at the yield curve slope? Which is fine, and commonly used as a leading indicator of recessions. But in a way its about the market predicting a change in the future value of money, rather than economic conditions right now. Sort of a second order effect, and IDK any timeseries that captures it that I can compare now versus last year with.
> I just sent you a list of common economic indicators, and you're willfully avoiding them, which doesn't bode well for your argument
You sent one random top ten listicle from investopedia. How do housing starts matter as a macroeconomic signal for a tech startup selling services to other tech companies? It won't, these are proxies for the larger economy. And it wont ever matter to them. Interest rate is the macro indicator that most directly affects such companies, so thats the one I'm discussing.
Other conditions exist, like every tech company undergoing layoffs and cost cuts is a factor but not usually treated as "macro." It's definitely a factor, and one worth reflecting on. But we're not trying to forecast global GDP here, so when an exec says 'macroeconomic conditions' think capital markets not rental vacancy rate.
You're dismissing other indicators, like GDP and unemployment, in favor of the one you personally feel is important; that's called cherry picking. When determining the health of the economy, you need to look at all major indicators.
>But we're not trying to forecast global GDP
This has exactly nothing to do with trying to forecast global GDP; that's not what these indicators are for.
Why don't they just say so.
https://www.statista.com/statistics/273951/growth-of-the-glo...
Why do you think the Fed just raised interest rates again?
Your macro is not the macro that Gitlab is referring to. It's disingenuous to interpret it otherwise.
All of these tech companies "overhired" (in hindsight) because they achieved unprecedented growth 2021~2022. If you're Gitlab - who sells to software development organizations - and the whole market has thrown hand over fist into the software development organizations, you have no choice but to chase that market. If that market (this is GitLab's macro) cools then you simply cut back.
Y'all think there is something nefarious going on and I don't get it.
> A macro environment refers to the set of conditions that exist in the economy as a whole, rather than in a particular sector or region. In general, the macro environment includes trends in the gross domestic product (GDP), inflation, employment, spending, and monetary and fiscal policy. The macro-environment is closely linked to the general business cycle as opposed to the performance of an individual business sector. [1]
If Gitlab had simply said what you said, then I wouldn't have commented at all.
Instead, Gitlab explicitly blamed economy-wide conditions for these layoffs, and that is what I take issue with. The economy is doing well. It's not all rosy, but in general, most indicators are fair-to-good, and trending better. (Manufacturing is one area that continues to trend worse).
And frankly, my comment was not directed merely at Gitlab, but rather the slew of layoff notices we've seen that appear to be copied and pasted from each other. It's comical at this point, and the idea that the broad economy is in bad shape is simply not true, and not supported by the evidence.
[1] https://www.investopedia.com/terms/m/macro-environment.asp
And a macro-environment doesn't refer to just the economy. Per wikipedia: "The macro-environment refers to all forces that are part of the larger society and affect the micro-environment. It includes concepts such as demography, economy, natural forces, technology, politics, and culture."[0]
Btw, if you really want to get pedantic, you specifically used macroeconomic and macro-environment interchangeably, which also have two specific but interrelated meanings. Gitlab used the word macroeconomic. Which sort of tells me all I need to know about how you and other people really understand Gitlab's message, which is exactly what I was referring to - the macro "view" is that people aren't spending like they used to on technology. Look at every publicly traded tech companies and you'll see that. Combine this with political factors (inflation at recent historic highs) and the macro "view" or whatever term you want to use seems dim compared to what it was in 2021/2022.
> And frankly, my comment was not directed merely at Gitlab, but rather the slew of layoff notices we've seen that appear
That was obvious, and so was mine.
Okay, so if I understand your point correctly, it's that Gitlab may have blamed the macroeconomic environment, but it should be fairly obvious to the casual reader that what is meant is that after the orgy of spending in 2021, tech spending is now broadly declining, and they can't ignore that. If sales are down, costs need to come down. So let's examine if that's true for Gitlab specifically, through their most recent quarterly data [1]:
> Quarterly revenue of $113.0 million, up 69% year-over-year
Gitlab's Q3 results showed higher revenue than any other quarter, and it wasn't close. It's many multiples higher than changes in wage indexes. Gitlab's 2022 revenue was nearly double their 2021 revenue, when technology spending was meant to be freely-flowing, and their second half revenue was higher than their first half. Gitlab is singing an entirely different tune to investors, and touting their rapid revenue growth.
There is no sign of any slowdown in Gitlab's revenue. It's higher than it has ever been, by a lot. Admittedly, Gitlab has not released Q4 2022 results, so there's been a few months since this release, but things have been improving over the course of the past several months, not deteriorating.
My complaint is not that Gitlab is conducting a layoff. If Gitlab over-hired, then fine. Course correct. If Gitlab wants to exit low-performers as part of a single broader cut, rather than manage them out, fine, do that. But don't blame the macroeconomic environment, especially when you're telling investors that the company is experiencing extremely high growth and improving margins, because it's disingenuous.
So all these tech companies who've laid people off are wrong and it's company specific issues? Don't think so.
> but not rapidly in a wage-inflation spiral.
inflation doesn't feel Tame for my extended family.
Investment, M&A and corporate spending activity has come to a near standstill in the past 6 months across multiple industries, as a result of the current economic uncertainty. Business loan default rates are expected to rise, there have already been increasing numbers of bankruptcies (e.g. Serta Mattresses, near default Bed Bath and Beyond, health care providers, etc). Not to mention the cascading bankruptcies of crypto schemes. The ramifications of permanent WFH have yet to cascade through the Commercial Real Estate sector - there are huge amounts of vacant office capacity that have yet to be written down, but we can expect to see sales of obsolete and aging office buildings at deep discounts. High interest rates also have an impact on the Residential Real Estate sector, with housing pricing declining, mortgage rates increasing, etc.
So 5-7% layoff is prudent for any large corporation in this economic environment, and layoffs / cost cuts have happened and will happen in many different industries, not just tech.
The email says that clients are holding off on big software purchases, and that's GitLab's bread and butter. I see no reason to disbelieve Sid on this.
In general this is one of those weird things about the economy, that perception/expectations dictate a lot of terms. It gives me the heebie jeebies sometimes. If enough people suddenly stopped believing that stocks represented real value, we'd be in a lot of trouble.
[1] https://time.com/6251381/imf-global-economy-outlook-2023/
You know who didn't? Apple. You know hasn't announced a hand-wringing, gosh-golly, tough times, BS announcement about layoffs? Apple. Got to hand it to Tim Cook, he seems to have stayed level-headed through the nonsense.
No, it isn't, and it's embarrassing at this point to continue insisting this. The macroeconomic environment is good, particularly in the United States. Business investment is growing at 3% a quarter (annualized), which is better than the average over the past decade. Employment is growing rapidly. Inflation has been tame over the past six months. And wages are growing steadily, but not rapidly in a wage-inflation spiral. In the US, the stock market is down about 10% over the past 12 months, but it's up over the past six months, and corporate earnings have been high.
Everywhere you look, the economic indicators are solid.
I do not have insight into Gitlab's customers, or the current state of Gitlab's business. But it is simply not true that the macroeconomic environment is tough. It is not. If there are problems, they are Gitlab problems, not macroeconomic problems.