First they send your work home, and then they send it next door.
Corporate learned during COVID that the metro premium isn't worth it any more. These layoff announcements--which have always occurred in the shadows--have three purposes:
1. Shift jobs to cheaper locales. In the US, many metro jobs are being moved to cheaper locations like the midwest. Western European labor is also relatively cheaper. Work from home works for you and your boss. I live in Raleigh-Durham. Things are on fire over here. Google, Apple, Oracle, Microsoft, and Amazon are all hiring at a rapid clip. My fiance just finished her PhD in comp bio, and she has competing offers... but last I heard, biotech is dead and some other thing about long term R&D slowing down due to rate hikes (more on why I think this is nonsense later).
2. Off set the massive over-hiring. The rush of cash during COVID and record profits lured many companies into growth-mode-at-any-cost. While they still need the head count in many cases, people were willing to cut corners in hiring and project quality (i.e. does this really have returns to justify the investment) so a cull is needed. Think about crypto for example. I have a feeling a good number of companies are regretting jumping on the crypto NFT train right about now.
3. I believe companies and the media loudly communicate layoffs in part to reduce labor's negotiating power. I can't prove this, but it seems about right. In December, Facebook was struggling to hire. It was in the news. Right now, I'm sure many people are afraid to ask for more money, but I've managed to wring out 10-20% more than what's being asked for by recruiters despite what everyone is hearing.
I know people thinking this is all Fed induced, but you have to remember, the money that was spent during COVID hasn't gone anywhere. It's still circulating. Companies also borrowed record amounts of cash during ZIRP that's due in 30+ years. Many of these companies have returns in the 10-30% band. A bump to 4-5% is no where near enough to slow down business given how much cheap money was created.
For more evidence, go look at the start up raises. In a recessionary environment, VC would be completely dead. Yes, deal making has slowed and garbage companies can't find financing, but let's be real: those companies should have never existed in the first place.
> Corporate learned during COVID that the metro premium isn't worth it any more.
I'm quite sure they were realizing it before that. Here in Canada, Statistics Canada data was already showing stronger job markets away from the large urban areas during the mid-2010s, which continues today, and the 2016 census showed a meaningful decline in large urban areas with communities of 1,000-29,999 seeing the largest growth. The 'counter-urbanization' moment was already well underway.
It is fair to say that COVID sped things up. There was, and still is, a lot of friction involved in making that transition, but COVID no doubt provided a lot of grease.
> Shift jobs to cheaper locales. ... I live in Raleigh-Durham.
Me too. Moved here 17 years ago. It's becoming far less a 'cheaper locale', much like many of the other formerly cheaper locales. Housing here is one of the areas still going up while other areas are cooling off, though I've just started seeing some cooling and price reductions in the past month or so. I'm not even sure what counts as 'cheaper' any more.
Can you actually get a condo for $150k in Raleigh, Durham, or Chapel Hill? Or is this in some distant town like Sanford or Pittsboro?
I'm genuinely curious, that sounds unreasonably low to me given what the housing market has done in the last few years. The triangle has a sprawl problem and it's only getting worse as most of the affordable housing is pushed further into the exurbs.
Agreed. I'm up in Youngsville (20 miles north of Raleigh) and... it'd be hard to get housing for a family of 3 for under $250k. Under $250k, it's mostly mobile homes. There's a smattering of condos in that range, but mostly over $250k.
We talked to a builder in Youngsville about building - mid 2021. Had initially verbal priced at high 400s. They back a few weeks later with "it's gonna be mid 500s, to low 600s." We backed out. 3 months later they're listing spec homes - in the same sub with $350k homes built 2 years ago - for $900k+.
Can you get something for $150k that a single person might want to live in? Probably, but you'll be commuting a lot to get to the Triangle proper.
Compared to LA, perhaps, this is 'affordable', but it's really... been a problem here (and it seems all over) the last few years.
This. I get that prices in many metros are still too high for your average earner, but I don’t understand how people can compare the price of housing in LA to a place like Indianapolis.
First they send your work home, and then they send it next door.
Corporate learned during COVID that the metro premium isn't worth it any more. These layoff announcements--which have always occurred in the shadows--have three purposes:
1. Shift jobs to cheaper locales. In the US, many metro jobs are being moved to cheaper locations like the midwest. Western European labor is also relatively cheaper. Work from home works for you and your boss. I live in Raleigh-Durham. Things are on fire over here. Google, Apple, Oracle, Microsoft, and Amazon are all hiring at a rapid clip. My fiance just finished her PhD in comp bio, and she has competing offers... but last I heard, biotech is dead and some other thing about long term R&D slowing down due to rate hikes (more on why I think this is nonsense later).
2. Off set the massive over-hiring. The rush of cash during COVID and record profits lured many companies into growth-mode-at-any-cost. While they still need the head count in many cases, people were willing to cut corners in hiring and project quality (i.e. does this really have returns to justify the investment) so a cull is needed. Think about crypto for example. I have a feeling a good number of companies are regretting jumping on the crypto NFT train right about now.
3. I believe companies and the media loudly communicate layoffs in part to reduce labor's negotiating power. I can't prove this, but it seems about right. In December, Facebook was struggling to hire. It was in the news. Right now, I'm sure many people are afraid to ask for more money, but I've managed to wring out 10-20% more than what's being asked for by recruiters despite what everyone is hearing.
I know people thinking this is all Fed induced, but you have to remember, the money that was spent during COVID hasn't gone anywhere. It's still circulating. Companies also borrowed record amounts of cash during ZIRP that's due in 30+ years. Many of these companies have returns in the 10-30% band. A bump to 4-5% is no where near enough to slow down business given how much cheap money was created.
For more evidence, go look at the start up raises. In a recessionary environment, VC would be completely dead. Yes, deal making has slowed and garbage companies can't find financing, but let's be real: those companies should have never existed in the first place.