• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Investing Tech layoffs continue but don’t let that fool you, employment remains strong
Investing

Tech layoffs continue but don’t let that fool you, employment remains strong

by January 5, 2023
by January 5, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

In a letter to staff on Wednesday, Salesforce, the US software company, announced it was cutting 10% of its workforce. The cut corresponds to close to 8,000 jobs. Salesforce stock rose 3% on the news. It had halved during a torrid 2022.

The news has cast a further dark cloud over expectations in the tech sector, which has seen plenty of layoffs recently. Meta was one of the earlier, and most high profile, axing 11,000 employees in November. But Twitter, Stripe, Amazon and Doordash have also relieved thousands of employees over the past couple months.

Why this is not that big of a deal

While the news is concerning for technology companies – and employees – it remains important to retain perspective when assessing the economy as a whole.

The tech sector is notoriously volatile and sensitive to interest rates. With many companies failing to return a profit, instead investors value these companies by discounting projected cash flow in future years back to the present. Hence, the interest rate at which these cash flows are discounted is of vital importance.

Therefore with interest rates rising quicker than Harry Kane’s World Cup penalty against France, tech stocks have felt the pain. From 0% to north of 4% in less than a year, and with the Federal Reserve maintaining that more interest rate hikes are imminent as it fights to curtail inflation, valuations have cratered.

A look at the Nasdaq, which is the stock index more heavily geared towards tech stocks, reveals the scale of the damage in the tech sector. It fell 33% last year, its sharpest decline since it fell 42% in 2008.

Tech sector is small, labour market healthy overall

But tech comprises only about 2% of the US economy. Another way to put it is this: while Salesforce laying off 8,000 employees sounds terrible, there are over 150 million employees in the United States alone.

The labour market overall remains stout. So much so, in fact, that is nearly a problem – in order for inflation to be reined in, there simply must be a softening in the jobs market. Tech, as we said, is extra sensitive to interest rates, but this is not as extreme in other sectors.

Yesterday, US job numbers showed job openings fell less than expected, further highlighting how tight the overall market remains.  “The labour markets are still too darn hot for policymakers” said Chirstopher Rupkey, chief economist at FWDBONDS in an interview with Reuters. “Fed officials won’t be confident their monetary tightening is working until hiring demand begins to slow”.

The report also revealed that there are 1.74 job openings for every unemployed person – not exactly a picture of intense distress.

What is next?

Eyes continue to be trained on the Federal Reserve, who last month stated that interest rates could continue to rise up to 5.1%. With a tight labour market and demand persistent, it appears that this number simply has to be hit.

The unfortunate reality is that if inflation is to be reined in to moderate levels – and the Fed is determined to pull it back down to the 2% target – then some of the pain I the tech labour market must be distributed out around the economy.

Thus far, it is just the high beta tech sector that has begun to lay off employees.

The post Tech layoffs continue but don’t let that fool you, employment remains strong appeared first on Invezz.

You Might Also Like
  • What made Logitech shares lose 20% on Thursday?
  • Straddle vs. Strangle Options Strategy
  • Please Follow Me Inside The Insiders
  • Grayscale CEO confirms tender offer if Bitcoin ETF path fails
Share
0
FacebookTwitterPinterestWhatsapp

previous post
3 takeaways after Wednesday’s FOMC Minutes release
next post
When Federal Interest Payments Come to Exceed the Military Budget: Time to Stop Defending the Rest of the World

You may also like

Index Options vs. Stock Options: What’s The Difference?

February 17, 2023

Buy Tesla stock even though its Q4 deliveries missed estimates:...

January 3, 2023

Cramer’s take on Wells Fargo’s $3.7 billion settlement with CFPB

December 20, 2022

Mizuho’s Dan Dolev is ‘super excited’ about this fintech stock

December 12, 2022

WisdomTree unveils nine new blockchain-enabled funds

December 14, 2022

Is it safe to buy the Boohoo share price dip?

November 24, 2022

Jim Cramer sees more upside in the Etsy stock

December 1, 2022

Decred launches new social media platform Bison Relay

December 16, 2022

JD Sports shares collapsed in 2022: Is it a buy...

December 21, 2022

Starbucks stock lacks a meaningful upside from here: Jefferies

December 21, 2022

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Oil prices rise more than 1% as Israel vows to intensify attacks on Iran

      June 20, 2025
    • RRG Alert Tech Vaults to ‘Leading’—Is XLK Signaling a New Rally?

      June 20, 2025
    • Apple looking to make ‘premium’-priced folding iPhones starting next year, analyst says

      June 20, 2025
    • Nike pushes back Skims launch with Kim Kardashian due to production delays

      June 19, 2025
    • The Fed Is Getting It Wrong AGAIN As They Hold Rates Steady

      June 19, 2025

    Popular Posts

    • 1

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 3,599 views
    • 2

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,874 views
    • 3

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,578 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,541 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,417 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,142)
    • Investing (538)
    • Stock (2,621)

    Popular Posts

    • 1

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 2

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 3

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Oil prices rise more than 1% as Israel vows to...

      June 20, 2025
    • RRG Alert Tech Vaults to ‘Leading’—Is XLK Signaling a New...

      June 20, 2025
    • Apple looking to make ‘premium’-priced folding iPhones starting next year,...

      June 20, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,142)
    • Investing (538)
    • Stock (2,621)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Chesapeake Energy stock has ‘tremendous upside’...

    January 5, 2023

    Options Gamma Explained: Delta Sensitivity To...

    April 22, 2023

    Barclays share price golden cross nears...

    January 10, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here