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.
But to be fair if a company can continue to operate or even grow while laying off employees, were these employees necessary in the first place ? I mean, should profit be given to employees, or owners ? Should company sacrifice their profit buffer to give it to employees they dont need ? Do they have a social responsibility to employees ?
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 ?
> But to be fair if a company can continue to operate or even grow while laying off employees, were these employees necessary in the first place ?
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.
You can almost picture the Executive team at Disney on one of their private yachts on an island somewhere being fed food and drinks cackling at each other about how they'll be able to convince people they "Had to" layoff workers.
Disney is laying off people because their movies keep bombing in the theaters. All they do is remakes and spinoffs of the famous old IPs they devoured, but that gravy train is coming to a stop. After a while people get tired of watching more half-baked Star Wars and Marvel sequels of bootleg quality.
They're running out of franchises to milk, and making something new and original is not in their corporate culture.
I’m guessing you didn’t read the article because Avatar made in over 2 billion dollars, exceeding even their expectations, becoming the 6th highest grossing film of all time. Or maybe it bombed, beats me.
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.
FWIW, Encanto (Disney Animation, 2021) and Turning Red (Pixar, 2022) were the most streamed movies on any platform for all of 2022 according to Nielsen. Moana (Disney Animation, 2016) was #4.
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.
Encanto was quite good, Turning Red was Disney quality, not Pixar (I feel).
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 would argue “ability to stream a 1+ year old movie repeatedly, on demand” is part of what makes keeping your subscription worthwhile.
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.
Once the accounts get to it, it will be shown to have lost money. (I'm referring how movie studios will get financially creative to portray popular movies "losing" money in order not to pay royalties to actors/writers"
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.
Disney has produced a bunch of duds this year, Avatar and a marvel movie or two were the only two shining stars in a otherwise drab sky. Lets look at Lightyear, a real bomb considering every other Toy Story movie has been a smashing success($220M made against a $200M budget). Or Strange World which did even worse($73M made against a $135-170M budget). Black Panther Wakanda looks like it had a good box office, but when compared against the first movie it did half the returns of its predecessor.
That's a funny one cause Lightyear was a really good movie. In some ways it was a much more mature sci-fi story than most of the big "sci fi" movie franchises.
strange world was really excellent. I never heard about it until it hit the streaming service, and then my kids watching nothing but that for like two weeks straight
Disney's film division made a huge profit last year. One of their films made over a billion in around 10 days, has passed the $2 billion in just over a month, and is still on track to earn another hundred million before it leaves theaters. (Disney demands, and gets, 100% of opening weekend revenues, and a declining share each week thereafter; the exact breakdown varies from chain to chain. For small/independent chains, Disney retains at least 50% of box office revenues for the first 8 weeks.)
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.
the comment you're replying to shows revenue up 8% for them. Is there any evidence of this claim? It seems like everyone is watching Andor, and they're fresh off the new Avatar movie, one of the highest grossing films ever? like i don't watch any of these movies, hate marvel and the new star wars, but you're just wrong?
It's a similar example of a company justifying layoffs with "difficult macroeconomic conditions" which actually doing very well. (Well I don't know if Gitlab are doing well but there are plenty of more examples like Disney.)
This feels like another semantic argument, this time over what "macroeconomic environment is tough" means.
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.
It isn't every big company. Apple hasn't, and they're the biggest of all.
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."
Or maybe all these layoffs wouldn't be a problem if we in the US had a government that supported people more reliably with wages and affordable health insurance for a decent duration after a layoff.
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.
I agree with you, but all else being equal, layoffs are stressful and... while I would prefer that companies have the flexibility to do so paired with a social safety net to lessen the impact, there's also an argument for employers who don't just plug in and then discard people like "resources".
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.
To me, complaining about the reasoning used by companies while not currently at the head of such a company feels pretty darn foolish. You just don't have the numbers at hands to qualify what they are saying.
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'm not an accounting nor a forecasting expert, but I'm comfortable theorizing that the current quarter's financials of a company doesn't necessarily dictate its next moves.
I find people's tendency to generate outrage from nothing other than headlines to be very annoying.
This would make more sense if any quarter stood completely in isolation, but some of these companies have been making sounds about "economic headwinds" since before the last quarter started, setting expectations low, and then still managed to "somehow" deliver outstanding or even record results.
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?
The sharply rising interest rates are a problem if you have a short runway that makes you reliant on debt or investor money, in which case yes you very well may need to cut costs just to keep the lights on.
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 do 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...
:facepalm: Ah yes, thank you for the correction, I definitely misread that. I also don't know Gitlab's specific financial situation, so perhaps the general point still stands haha.
> 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.
Many might just take the opportunity because "everyone else" is doing it.
>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.
That doesn't really mean anything other than they are all riding the same wave.
People say “free money spigot” but I don’t understand it. Google has 120b in the bank. How was it able to leverage nearly zero interest loans before? Why isn’t new risk free (nominal) growth on cash a benefit considering they have so much cash?
All of Google advertisers were able to make use of easy/cheap money to fuel their own business, in which they bought Google and YouTube ads with part of that money.
How much are interest rates relevant for Tech companies particularly growth oriented firms? They raise equity via stock not debt and VC firms aren't primarily raising money for their funds via debt either.
> Everywhere you look, the economic indicators are solid.
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.
>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
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].
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.
That isn't a "random listicle", it's a list of major macroeconomic indicators that are very well known. You're free to discover for yourself that housing starts is among the major indicators used by the government and businesses in their determination of the health of the economy.
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.
Investopedia? I don't have any advice here, but The Personal MBA[1] is a reading list, and their pick "How to Read a Financial Report: Wringing Vital Signs Out of the Numbers"[2] doesn't sound like the worst. But I haven't read it, so don't mistake this for a personal endorsement.
Record high credit card balances, record low personal savings, 40 year high inflation, rising interest rates and no sign of the fed stopping. Housing affordability at its lowest point since the real estate bubble and crash of 07/08. You are on some very good copium if you believe the economy is in good shape.
This economy is baffling to basically every professional who looks at it.
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.
I listen to conservative AM radio a fair bit (because I'm not right in the head) and a local guy was really struggling with this the other day. "The jobs numbers, yeah, those are really good, but... um... economy bad? Can't possibly say it's good while a Democrat is President, but um, yeah, I was surprised at how good the job numbers were. But... it's still bad, somehow, because reasons. Inflation? Oh and we're definitely on the cusp of a recession, if not a depression, I'm just sure of it."
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.
It makes sense to me that the economy overall is doing well but that the tech sector specifically over invested during the pandemic and is now contracting.
That’s my thinking. Tech companies over-expanded based on predictions juiced by the pandemic accelerating things online, that actually didn’t happen so they are over extended.
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.
That sounds like proper risk management then? If you don't know what's happening then it makes sense to play safe. The only problem is that those collective layoffs might actually slow economies down and exacerbate the issue at hand...
That's interesting. Thanks for sharing. (Eyeballing it) That seems to be a continuation of a trend since 2015. I wonder if that relates to the prevalence of rideshare, which also caught-on about that time? https://trends.google.com/trends/explore?date=all&geo=US&q=u...
There are always some measurements by which the economy is currently a disaster, and you are definitely going to hear those from companies that need to or want to lay off employees or from opposition politicians. A lot of other measures are solid now, the main thing is rising rates will hurt companies that aren't very solid financially and give everyone else a nice excuse to let go of employees.
The only economic conditions that matter to any company is whether they will be able to continue earning money the way they have been.
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.
> The only economic conditions that matter to any company is whether they will be able to continue earning money the way they have been.
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.
> Interest rates matter if a company financed expansion using debt.
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.
which says a lot if the economy is disconnected from the prosperity and economic outlook of the majority of people. In such a case, a "good economy" is just a synonym for "elite are still doing well."
The bottom 50% have collectively more than doubled their net worth in the last 3 years[1], and their wages have outpaced inflation even at its currently high level[2].
Inflation began to spike in the U.S. in April of 2021, when it hit 4.2%. Inflation continued to climb, hitting 7% year-over-year by December 2021. Sadly, 2022 didn’t see any slowdown in inflation as the rate peaked at 9.1% in June. Starting in July, inflation began to fall slightly, though it still sat at 7.7% in November.
Your atlantafed link shows unweighted wage increase peaking at 6.7% in August 2022. In what way did wages outpace inflation?
Click on the button to separate by wage level. Wage growth for the bottom 50% has significantly outpaced wage growth for the top 50%. Their wages grew at around 7.3% over the last 12 months, which outpaces inflation. It may have been a bit under when inflation was at its peak, so it's possible they just came out even with inflation overall, which is still pretty good when you're doubling your net worth at the same time.
This, I think, seems to be the important thing that seems glossed over in news articles. At certain income, the economy is doing great. But that is within the group that, historically, has always done well. When you have enough money, a lot of pain can be made largely removed.
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.
To your point about services reduction, I don't agree. I think more of a re-allocation of where capitol is going is the cure. We should increase or create new social programs that incentivize native births, home ownership, making it possible for most households to have just one person in the workforce, etc - and reduce the money that goes towards foreign wars, foreign agitation, welfare for nations across the world, etc. And I agree, tax hikes but targeted at the financial system which makes money in parasitic ways. In short, the economy needs to be optimized to the benefit of the lower and middle classes, the working class, and no longer to the 1%. This all probably requires heavy nationalization of banking and major industry. I dont see this as an evil and mistrust those that tell me to fear putting the power back in the hands of the people and away from the elite.
<< And I agree, tax hikes but targeted at the financial system which makes money in parasitic ways. In short, the economy needs to be optimized to the benefit of the lower and middle classes, the working class, and no longer to the 1%. This all probably requires heavy nationalization of banking and major industry. I dont see this as an evil and mistrust those that tell me to fear putting the power back in the hands of the people and away from the elite.
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.
> … is shared sacrifice similar to how a war effort is sold.
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.
<< So anything that requires compromise cannot be undone? I’m not tracking your logic here.
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.
Eh, the US didn’t fund the German recovery. I think you seem to be confusing pre WW2 Germany (30s) and post war Germany (50s). The German state before national socialism was having hyper inflation, spiraling unemployment and a failing economy. The national socialists created one of the greatest economic recoveries of all time. It took the entire western world plus Russia to conquer it.
Post war Germany was hallowed out and the nation is a husk of what it once was, basically a US vassal state.
Then, sadly, you are even more wrong than before when I gave you the benefit of the doubt. 30s Germany got their stuff under control for reasons that are kinda frowned upon these days ( actual fascism - as in convergence of state control and private sector, waging war and annexing parts of Europe for lebensraum, removing from society perceived outsiders, dissidents and other undesirables and so on ). I would like to think you are not suggesting those solutions implemented.
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.
<< 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.
> 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.
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.
It's the "we're in a downturn" crowd that is relying on vibes and feelings. GDP is growing. Unemployment is the lowest it's been in over 50 years. Real wages are growing for the bottom 50% of earners despite high inflation.
You should actually look at the concrete numbers. GDP and the unemployment rate are the two biggest economic indicators used in determining a recession, and these concrete numbers tell you that you're wrong.
Many people feel fine right up until the point they get diagnosed with a terminal illness. The point being, this would be like going to the doctor and having high blood pressure, high cholesterol, high blood sugar, etc. etc. The patient can be up, walking around, feeling OK, but in reality they are headed for a nightmare.
A bad one. What's the insight here? If a body were a nation-state, it'd be a totalitarian hellscape where life is cheap, individuals exist only to support the collective and some populations are invaders to be exterminated.
I'd call it a complex system. It's entirely possible to have a component in a system that may disrupt the whole system in a whole new, unpredictable way.
Just like some sort of asymptomatic tumor which breaks the whole body once it metastasizes.
Yes, and as I don’t want metaphorical chemotherapy for the country I’d prefer we chose a different metaphor. An analogy shouldn’t just be some strained parallels, it should lead us in useful and not destructive directions.
What is the relation between people's inability to notice having a brewing disease and business predicting turmoil in the future hence going for the diet?
Right, this is the problem. The stock-market / macro-growth figures look good, but /personal/ finances and true cost-of-living look to be in trouble.
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.
I think that's the part that many naysayers don't appreciate. When the average family is already under incredible pressure it does not take much to trigger a deep recession. Even if one or two percent of people lose their job right now that is going to translate into a lot of missed debt service, foreclosures, etc.
> Record high credit card balances, record low personal savings, 40 year high inflation, rising interest rates and no sign of the fed stopping.
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.
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.
And it is no wonder they have issues when their customer support is hostile. I used to pay for Gitlab but switched to the community edition after having to deal with their support over billing issues. Easier to use the free version than the paid version. Making money does not seem to be a priority.
Same here situation here (went from paid to free for a similar reason). We are a small team, so we don't represent a lot of $, but it's changed how I perceive Gitlab as a company, and it also means I won't recommend them anymore to clients.
> No, it isn't, and it's embarrassing at this point to continue insisting this.
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.
There is a great deal of uncertainty in the current economic environment. There was a pandemic, permanent shifts in the ways people live/work/travel, massive geopolitical events involving multiple, full spectrum global superpower conflicts, huge Ponzi schemes rising up and then collapsing in spectacular fashion (crypto), stagnating productivity (exacerbated by work from home), government bailouts followed by inflation hitting multi-decade highs and central banks mistaking raging inflation for something "transitory" and acting too late, and now skyrocketing interest rates, ongoing labor and supply chain issues, a looming recession and open questions about the ability of central banks to engineer a "soft landing" for the economy.
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 macroeconomic problems facing all of these corporations are that labor is feeling empowered, that's it. Between union actions, NLRB actions, wages rising, low unemployment, and the whole return to work debate; power has subtly, slightly shifted towards workers. And it scares the shit out of the capital class. In response, they're culling the herd and raising interest rates to discipline workers.
The cost of money went up dramatically last year, and businesses which relied on very cheap (almost free) money for the last decade now need to make a profit or die.
They are therefore panicking about the near future (and rightly so), this is what they mean by 'The current macroeconomic environment is tough'.
> 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.
IT industry has benefited the most from COVID along with drug companies, due to that, many if not all of them over hired by like 20% or much more, that's the main reason they're cutting ~10% across the board now when COVID goes away, it's a normal business boom and bust cycle decision to me.
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.
For a company like GitLab, the widespread perception that macro conditions are bad is equivalent to their actually being bad.
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.
All of that looks good but the current rate is at 4.5% with expectation to continue to rise.
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.
> Inflation has been tame over the past six months.
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.
I also wonder where the widespread sentiment is coming from. Everybody had been expecting a recession on the basis of prediction markers like inverted yield curves and because it's historically due. That being said, no actual economic markers are actually pointing at one.
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.
> No, it isn't, and it's embarrassing at this point to continue insisting this.
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.
Let's be clear about what the macroeconomic environment is, because it has a specific meaning. I'll quote from another definition here, so I'm not merely offering my own interpretation:
> 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.
> Instead, Gitlab explicitly blamed economy-wide conditions for these layoffs, and that is what I take issue with. The economy is doing well.
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
> the macro "view" is that people aren't spending like they used to on technology.
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.
if, as you say, the economy is super strong and employment opportunities are robust, then nobody should worry about the layoffs because hey, you’ll find a new gig easily!
Many people have been at a place for a while, some over a decade. Massive layoffs means quick and picking individuals who rarely demonstrated poor performance.
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?
The world has just moved from a decade plus zero interest rate environment, combined with massive multitrillion dollar pandemic QE and accompanying hyperinflation, into a rising interest rate environment.
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.
Wow, things really are so rosy on planet jlmorton. But meanwhile on planet earth, and especially the Western hemisphere, real inflation has been going through the roof -- to name only one of the myriad economic problems.
Indeed. In fact 10 days ago the IMF upgraded their outlook for the global economy in 2023.[1]
These layoffs and their accompanying statements from the CEO talking about "challenging macroeconomic environments" are really starting to feel like CEOs just parroting each other.
Current layoffs are not due to macroeconomics, but more a normalization
of what happened in the last couple of yers. Most of the companies laying-off
they all over hired.
Tech went bananas hiring during the pandemic, and are only suddenly discovering that this may have been a bad idea.
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.
I imagine the saying 'be the change you want to see in the world' pervades the c-suite pretty thoroughly. Thus, if 'the current macroeconomic environment is tough' is not true now, with all these layoffs it'll likely be true soon enough with all of these layoffs and the resulting cascading copycatting.
I saw that in one place I was working - macroeconomic environment was always tough for them. Like 2014-2016 was not global depression and it was long past 2008 but somehow they were still in depression.
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.
The “good jobs report” is just smoke and mirrors to have something positive to say at the state of the union. Changing how you measure the number of jobs so it looks better is just par for the course for politicians. Using the old measure that 400k over the 100k expected is 20k less than expected.
Maybe they didn’t. Still smoke and mirrors though, we “gained” 500k jobs, even though payrolls would show a decrease in 2.5m. But it was expected we would lose 3m seasonal jobs. So voila!
It’s like when the government says we saved 50 billion in spending this year because we were planning on increasing spending by 150 billion, but only increased it by 100 billion instead.
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.
> But it was expected we would lose 3m seasonal jobs. So voila!
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.
> Everywhere you look, the economic indicators are solid
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.
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.