That didn’t take long…
Last Tuesday I wrote you about what appeared to be some discrepancies where employment numbers go, specifically job cuts that didn’t seem to be showing up in the reported numbers. And that the numbers could change dramatically…
For the past several months, players in the tech sector have been busy trimming the newly found fat. (Amazon cut 100,000 employees so far this year.) And more from the likes of Alphabet (Google) and Facebook.
Maybe they were only waiting to get through the election season.
Literally about three hours after we published it, the Wall Street Journal published the following breaking item from Meta (my emphasis)…
The coming cuts are expected to total many thousands of employees and will likely be the largest of the year to date in the tech sector, The Wall Street Journal previously reported.
In a subsequent article, Zuck stepped up with more details…
“I’ve decided to reduce the size of our team by about 13% and let more than 11,000 of our talented employees go,” Zuckerberg told employees in a letter published on the company’s website.
Not Boding Well for Employment Numbers
This is a potentially significant announcement for the economy. The tight labor market has been the key everyone — from the Fed to the Biden administration — has pointed to to demonstrate current “economic strength.”
Zuck took the heat for the layoffs saying he anticipated the increase in online activity — and associated revenue — that ramped up during the pandemic would continue once lockdowns passed. They hired and spent assuming that trend would continue.
He was wrong.
Now he’s faced with the reality of having to cut way back to bring this business back in line with economic realities.
A lot of other tech/growth companies have been facing the same dilemma and cutting employees. This still has the potential to cause a significant shift in the employment landscape.
But there are other indicators showing cracks in the Economy.
The first two quarters of this year were plagued by economic contractions — the traditional sign of impending recession.
Naturally the administration denied that it indicated any trouble in the economy. The most recent print would seem to have backed that claim up. Except… On a closer look at the mountain of numbers released by the BEA, the 2.6% growth in GDP output was not as rosy as it was made out to be.
Here’s basic GDP math: Consumer spending + Government spending + Investments + Net Exports (exports – imports) = GDP.
The US balance of trade has been negative for decades. However, given the dollar’s strength over the past months (likely thanks to the Fed rate hikes) the dollar value of exports created an outsized impact on the quarter’s calculation coming in at +2.8%. Deduct that from the final tally and the other spending actually contracted by .2%.
The number was more explicit on the domestic end when you take a look at the number called “final sales to domestic purchasers.” This measures how much US citizens are actually purchasing. At less than 0.1%, this number is showing little if any economic life here in the states — no one is buying anything…
Another sign is coming from the big global shippers.
Recently FedEx CFO Michael Lenz revealed “the company has reduced flights and parked planes to cut costs in response to soft demand for package delivery.”
Maersk, the world’s largest owner of container ships, lowered its outlook for the growth of 2022 global container demand, forecasting 2023 could be worse.
So while economic numbers may look encouraging on the surface, there’s still reason to be cautious that the worst is not behind us.
Make the trend your friend,
Editor, Streetlight Daily