Tech Bust Takes Next Step: Layoffs & Hiring Freezes

Dotcom Bust 2 has begun. Only bigger.

By Wolf Richter. This is the transcript of my podcast recorded last Sunday, THE WOLF STREET REPORT.

The plunge in so-called tech and social media stocks, especially of companies that are losing money and burning cash, has been spectacular. It started in February last year, with stock after stock getting taking down by 70%, 80%, and 90%, SPACs and recent IPOs in particular.

Then came the big names, like Netflix which is down 72% from its high, or Carvana, which despite the big bounce Thursday and Friday, is down 91% from its high.

The big ones are now talking about cost cuts, hiring freezes, and layoffs. Even the biggest tech and social media stocks, profitable companies with huge market caps, are suddenly talking about hiring freezes. A bunch of SPACs warned about running out of cash, and about their ability to keep operating as a going concern. Biotech startups are in a death spiral and are laying off people left and right.

Companies are adjusting to a new reality, where earnings and cash flows matter. Where expenses matter. And expenses, including compensation expenses, are exploding due to raging inflation.

Startups can no longer rely on investors to endlessly feed their cash-burn machines. And for them, raising money has suddenly gotten difficult. Investors have gotten skittish. The founders of these startups are being warned by venture capital partners to get with it, cut expenses, and start aiming for positive cash flows, or else.

So they’re trying to cut costs, or at least limit the explosion of costs, and they’re putting in place hiring freezes, and some layoffs, and they’re cutting back in all kinds of ways, marketing expenses, office expenses, and they’re putting some of their unneeded and vacant office space on the market, which is adding to the already historic glut of vacant office space.

The layoffs are relatively small and few for now. Labor shortages persist, and unemployment claims remain near historic lows, and laid off workers, thanks to the labor shortage and the 11 million job openings, are often picked up quickly by other employers. And many of these people already have a job lined up when they get laid off from the current job.

And even when a company lays off people in one division, it may continue to hire in its other divisions. And the hiring slowdowns, or hiring freezes, just reduce the huge spike of 11 million job openings. It’s not like there’s a flood of unemployed tech people roaming the streets.

But the whole thing has changed. Their stocks have come down hard, and suddenly expenses matter. And one company’s expense is another company’s revenues; or is an employee’s income. And that’s going to percolate from here to other companies, and to commercial real estate, and to housing.

The tech boom is off. And what is next – what already began in February last year, one stock after another – is the tech bust.

On May 26, it emerged that Microsoft, whose stock is down 22% from the high, imposed a hiring freeze on its core division. Executive VP who heads the group that develops its Windows operating system, its Office applications, and the Teams applications, well, he told employees in an email on Thursday that new hires for the software group would have to be approved by upper management. Which is effectively a hiring freeze for the group.

Microsoft said in a statement cited by Bloomberg, that “it is making sure the right resources are aligned to the right opportunity.”

Microsoft said that it would continue to hire, but it “will add additional focus to where those resources go.”

That’s the new cost consciousness. This is very different from the frenzied quest over the past couple of years, where tech companies fell all over each other trying to hire people away from each other.

Netflix, whose stock plunged 73% from the high, is laying off people. A few days ago, it emerged from a WARN filing with the State of California that it had laid off 106 people. Later reporting said that it had laid off 150 mostly US-based employees.

On May 24, it emerged that PayPal, whose stock also plunged 73% from the high, laid off dozens of employees from its offices in Chicago, Omaha, and Chandler, Arizona, to cut costs. And it emerged that it is planning to shut down its entire San Francisco office. San Francisco is still one of the most expensive places in the US to operate and staff an office. In a WARN filing with the state of California on May 17, PayPal announced plans to lay off 83 people in its headquarters in San Jose, California.

This is all about cost cutting. The layoffs are small compared to PayPal’s workforce, which had jumped by one-third amid the huge hiring binge over the past couple of years, to over 30,000 employees.

On May 24, it emerged that Lyft, whose stock collapsed by 80%, imposed a slowdown on hiring and is cutting budgets of some departments, the Wall Street Journal reported. It will leave some jobs unfilled, will fill only those that are critical, and will reprioritize projects to those with the most immediate impact.

On May 18, it emerged that Facebook, I mean Meta, whose stock plunged 49% from the high, had not only imposed a hiring freeze for certain engineering roles, but also for recruiters, and low-level data scientists. And it’s cutting investments in various products.

To soothe the rattled nerves of his employees, who’re fearing broad-based layoffs, CEO Zuckerberg told them in an internal all-hands meeting, that layoffs were not being planned, according to The Verge, which had obtained a recording of the meeting.

He said, “I can’t sit here and make a permanent ongoing promise that as things shift that we won’t have to reconsider that. But what I can tell you is that as of where we sit today, our expectation is not that we’re going to have to do that. And instead, basically what we’re doing is we’re dialing growth to the levels that we think are going to be manageable over time.”

On May 17, it emerged that crypto-exchange Coinbase, whose stock collapsed 83% from the high, imposed a hiring freeze for two weeks, and cut spending on cloud services, including Amazon’s AWS. Two days later, the Chief Product Officer at Coinbase sent out a series of tweets with more details.

On May 12, it emerged that Carvana, whose stock collapsed 91% from the high, laid off 2,500 employees, which is about 12% of its work force. It blamed a recession in the auto industry. The irony is that the company lost a ton of money every quarter, including during the hottest used car market ever, when retail prices spiked out the wazoo, and when dealers raked in massive profits.

The company is in an existential crisis, and it’s desperately trying to raise cash to fuel its cash burn machine for a while longer and to fund a misbegotten $2.2 billion acquisition it should have never done,

On May 9, Uber, whose stock plunged 64% from the high, made waves with its hiring freeze and cost cutting plans. Its CEO told employees in an email, obtained by CNBC, that the company would “treat hiring as a privilege and be deliberate about when and where we add headcount.” He said Uber needed to focus on profitability. No kidding. The company has been around for over a decade, and still loses a ton of money, including $5.5 billion in Q1.

He said, “It’s clear that the market is experiencing a seismic shift, and we need to react accordingly.”

He said that Uber would be, quote, “even more hardcore about costs across the board.” So the company will cut spending, including on marketing and incentive spending.

On April 26, online broker Robinhood, whose stock collapsed by 88% from the high, announced that it would lay off 9% of its full-time workforce. The company had about 3,400 full-time employees at the beginning of the year.

These are some of the biggest names. There are lots of companies that are now trying to cut costs in order to get profitable, or to remain profitable, or in order to just remain alive.

There have been dozens of bio tech companies that have laid off people in recent months, usually when phase II or phase III clinical trials for new drugs didn’t produce the desired results. That’s a common event with biotech startups. But there was such a boom in biotech startups in recent years whose products are now running into walls, and so there is this flood of failures. Investors’ willingness, nay eagerness to throw money at biotechs, encouraged the boom, and now the money is running out, and the results are lousy, and the sector is in a death spiral.

All these companies are suddenly having second thoughts about hiring willy-nilly whoever they can grab and throwing piles of money, which was free, at everything.

For now, this isn’t going to create unemployment because, number one, most of these actions are hiring freezes, not mass-layoffs; and number two because there are still a huge number of open jobs out there, and most laid-off workers get hired quickly, and we see this in the weekly unemployment claims that have remained near record lows.

But it will take pressure off the labor market, and we should see the huge historic number of job openings, those 11 million job openings, come down.

What the plunging tech stocks, SPACs, and recent IPOs, the hiring freezes, and the layoffs show is that this ridiculous boom amid the most overstimulated economy ever has turned into a bust, now that the Fed is beginning, and I mean, it’s just beginning, to take away the punch bowl.

It will take many years to work through this hangover from the money-printing binge. Many of the SPACs and recent IPOs and bunch of other companies will either shut down and their stocks will go to zero, or they get bought for cents on the dollar.

During the dotcom bust, the Nasdaq plunged 78% over two years, with a huge rally in between, that drew in more people that then got wiped out. Many companies shut down and disappeared, and their stocks went to zero. That’s the kind of scenario I see now for the current mess.

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  127 comments for “Tech Bust Takes Next Step: Layoffs & Hiring Freezes

  1. Island Teal says:

    Wowza…1st again. I’ll take it.
    Thanks Wolf for a great article and all the comments that spring forth. 😉👍

    • ChangeMachine.org says:

      Can we just make a rule about banning “first” posts that don’t a address the topic? You could at least express some disdain for San Fran, which has already shrunk more that any other major city, BEFORE tech bubble 2 even popped! O

  2. Pauper says:

    So…. I shouldn’t learn to code?

    • qt says:

      Just learn to code good

      :-)

      There will always be demand for smart programmers.

    • Halibut says:

      Nobody codes anymore. You just “do Agile”. It’s more like”talking about coding”. And boats and anchors. And burning down user stories in the parking lot to get your cadence in support of the continuous integration pipeline.

      • Iona says:

        Lol, funny and painfully true. Had meetings where there were maybe 5 actual engineers and another 10-15 manager types and system engineers just charging but very slavishly devoted to “the process”. Very little interaction with the customer seems to be par for the course, so it’s off to design a product based on little to no real world requirements by people completely unfamiliar with the domain and work flow. This will work out well!

        • NBay says:

          I noticed years ago that the only thing managers like better than designing forms was designing flow charts. Some liked boxes and some liked ovals.
          That’s about all I know about the subject.

        • Patricia says:

          Thanks for the great information. I knew something like this was coming. What does that say for Austin? All these Californians coming here and pricing us out! Crazy!

      • unamused says:

        “Nobody codes anymore.”

        Not exactly. You still need one guy on the staff who can actually write software to correct the spaghetti generated by those who can’t but somehow have awesome resumes. Part of the ‘get it done, fix it later’ paradigm.

        The dynamics of software generation are interesting. The Mythical Man Month informs us that adding programmers to an already-late project will make it even more late. Agile is the most inane methodology for software engineering ever contrived because it amounts to Cowboy Coding in teams. It started out as a euphemism for desperation but was adapted to become a tool for marketing software engineering services to clueless execs.

        Remarkably enough, there are US firms which specialize in fixing offshored software projects. They frequently just redo the whole thing and charge less than the offshore contractor for it.

        Btw. Anybody who pays for function point counts is a blithering idjit.

        • 91B20 1stCav (AUS) says:

          una-‘get it done, fix it later paradigm’-my cafe sprayed yet again over the keyboard. Good ‘un.

          possibly leading to ‘…let the A.I. (replacing the ol’ reliable ‘George’), do it…’.

          may we all find a better day.

        • Halibut says:

          “Agile is the most inane methodology for software engineering ever contrived”

          True, but it does come with more word salad than any other religion.

        • HotTub says:

          I worked for a major software firm for 27 years as a tech writer. In the mid-2000s many of our projects were offshored to India due to much cheaper labor and benefit costs. One of our main engineers told me that all of the projects that we sent “over there” had to be brought back and fixed here because the quality of the products done there were horrible.

          So really, where were the cost savings? I guess the bean counters only looked at the company’s financial numbers, and quality be damned.

        • Educated but Poor Millennial says:

          Hot Tub,
          It is same in other engineering projects, Structural designs and engineering, Mechanical, HVAC, Electrical, plumbing design and engineering, manufacturing engineering etc. are sent to India

          Without any exception, so far all have major need to be revised and be fixed with a lot of time and money wasted. Even more than projected money saving forecasts. and at the end we are not sure if the work was still correct!

        • Flea says:

          Why do you think BOEING planes are falling out of sky, outsourced to India . Can’t fix STUPID

        • Shawn says:

          In 2016, we were suppose to have self driving taxis in SF. Wow, that didn’t age well.

        • Ccat says:

          Soooo true! Sounds like y’all been there done that! Me to, actually.

      • WolfGoat says:

        Agile is so passe… Low Code baby!

      • Graham says:

        Wow! Talk about a changing work.

    • ChangeMachine says:

      Learn to code if you want, just don’t learn to launch a SPAC or NFT now.

    • SomethingStinks says:

      Learn to pad your resume with fake buzzwords and “reinvent” yourself, which is tech speak of faking cr@p that you have no idea about. Learn to have no self respect and brownnose shamelessly. Then find a friend/relative/neighbor that will hire you as a director or senior manager in some tech company. Shamelessly self promote while mooching off of your peers and lie you way to the top. Your actions will leave a trail of badly implemented projects that will be impossible to support or fix, which should pave way for more company spending. In the meantime you will be on your way to c-suite to be able to pay back the friend/neighbor/relative that hired you in the first place and start your own version of circle jerk. End rant!!

      • DawnsEarlyLight says:

        You’re hired!

      • Anthony A. says:

        Wasn’t this how the first Affordable Care Act website got developed?

      • Harvey Mushman says:

        Just memorize these and you’ll be fine!

        Return on investment
        Synergy
        Customer journey
        Deep dive
        Impact
        Ballpark
        Core competency
        Visibility
        Startup
        Sustainability
        Pain point
        Quick win
        Hyperlocal
        Next generation
        Holistic
        Logistics
        Alignment
        Freemium
        Quota
        Touchpoint
        Retargeting
        Content is king
        Big data
        Incentivize
        Move the needle
        Unpack
        Ping
        Drill down
        Ecosystem
        Bandwidth

        • TheWealthEffectIsPonziScheme says:

          Gross, imma go take a shower now

        • SomethingStinks says:

          Couple more

          D&I : Diversity and including
          ESG framework

          Try not to throw up or gag as you memorize these and the fine list above.

        • HotTub says:

          Harvey Mushman, all those words you listed just brought back a hilarious sick memory of mine. hee hee

          At my company, every quarter we’d have have to go to an off-site, all-hands meeting that was held in a local hotel’s ballroom. During the CEO’s or CTO’s “speech”, these guys would always spout words such as what you listed. I got so tired of hearing this junk at every stupid meeting that I came up with a game that a few of my friends and I played during the meeting to alleviate the boredom. It was called BULLSH*T BINGO.

          Being a graphic designer, I came up with five Bingo-style playing cards that each of my four friends and I used during the meeting. In each square, I added each of the buzzwords used by the head honchos. I then gave my friends Bingo chips to place on the cards when we heard one of the words.

          When we went to the meetings, all five of us would sit in the backrow of seats in the ballroom. During the speech, when we heard the buzzwords, we’d put our chips on the squares (just like Bingo). When one of us would fill in a complete line on the Bingo card with the chips, the one who did it would yell out:

          “BULLSH*T”!

          Of course, we didn’t say it loud enough for everyone to hear, but for those sitting around us, they definitely heard it.

          I’m surprised I lasted 27 years at that company. LOL

      • Shawn says:

        Absolutely Nailed It!

    • Moosy says:

      “ So…. I shouldn’t learn to code?‘

      I think you should stick to coal mining if you currently are amd not listen to that bafoon whoever it was that stated last year or earlier to switch to coding to coal miners.

      And if you are coding, consider switching to become coal miner. Those mining companies have money coming out of their ears and can stuff their employee’s 401k pretty well.

  3. Djreef says:

    TINA lives.

  4. Phoenix_Ikki says:

    Good, much like a cleansing that’s been long overdue…reverse wealth effect…here we go

  5. Chris P says:

    It’s hard to believe that the SP 500 is so close to all time highs while the rest of it tumbles.

    • Cas127 says:

      Pretty sure even the 500 is off about 17% from its all time (idiot) high.

      With a 21 PE today it could probably stand to lose another 40% with interest rate normalization (after 20 years of Fed theft) but even a 17% loss isn’t chicken feed.

      Of course, the tech centric indices (with truly goofy PEs) are doing worse.

      • Augustus Frost says:

        A 40% haircut from 4200 is about 2500, not even close to cheap but historically overpriced.

        The dividend yield is still a sub-basement 1.40%, a lot more meaningful than the accounting number known as earnings.

        Any actual interest rate normalization means much higher interest rates, even if current inflation recedes.

        It means pricing to the actual risk being taken, which should include the garbage balance sheets most public companies actually have, with or without the current fake “growth”.

        • phleep says:

          Tax revenues of fake money are up. Medicare and Social security have a reprieve. On paper. Somehow, some way, some day, all this BS (and corruption and decay of culture and innovation) must show up as a lower living standard.

          I cannot imagine how stocks in general can spring to life and produce better real returns after this fiasco. More BS, I am sure will be produced. But it does sound like a nice fraction of this BS is being exposed.

        • Augustus Frost says:

          Phleep,

          Let’s hope it doesn’t end this way, but the neocons are trying really hard to make it happen.

          “For many years the fortunes of war changed camps. Then Nabopolassar and Cyaxares, the Mede, brought the
          Scythians over to their side. Their armies advanced from three sides against Nineveh. In August of the year -612 the dam on the Tigris was breached, and Nineveh was stormed. In a single night the city that was the
          splendor of its epoch went up in flames, and the centuries-old empire that ceaselessly carried sword and
          fire to the four quarters of the ancient world—as far as Elam and Lydia, Sarmatia and Ethiopia—ceased to exist forever.

          Unpublished manuscript, The End of Nineveh from “The Assyrian Conquest.”

    • Old School says:

      Hussman has good article up explaining how long term stock market returns can be determined very accurately if you know four factors 1. Beginning price to sales, 2. Ending price to sales 3. Nominal GDP growth rate and 4. starting dividend.

      Current price to sales is still off the chart at 2.6 instead of long term norm of 1. Only 32 years ago price to sales was 0.7.
      Big government deficits, Zirp and QE gave us the big run up in price to sales that got above 3, but that is over and done. Gov/Fed will have to conjure up some more magic to keep the empire expanding.

      • Augustus Frost says:

        “Gov/Fed will have to conjure up some more magic to keep the empire expanding.”

        During the mania, a lot or practically everything went right.

        In the upcoming major bear market, a lot of things or practically everything will go wrong.

        In terms of the Empire, neocons in both parties seem to be trying really hard to start a hot shooting war with a major adversary if not more than one simultaneously. Like US monetary and fiscal policy, foreign policy has gone completely off the rails.

        At some point, they might get their wish.

  6. Bobber says:

    I’m not an Elon Musk admirer, but I enjoyed his comment the other day. He said, if you don’t return to the office, you can pretend to work somewhere else. He’s clearly not afraid to buck a trend and take a risk.

    • Swamp Creature says:

      Yep, Musk hit it out of the park. He told these lazy white collar flunkes to get off their sorry asses and get back to the office like the rest of the blue collar workforce. If they can’t or won’t then GET LOST. We don’t want ya and we don’t need ya.

      • Old School says:

        I get the sense that Elon tends to drive people too hard. I am sensitive to that as I have worked for a big corporation like that. I don’t think you can build a great company by churning company employees.

        The analogy is you can’t sprint a marathon. Elon is getting compensated to live an unbalanced work life. Most people don’t want to do that.

        • unamused says:

          “I get the sense that Elon tends to drive people too hard.”

          Wall St. has been in love with tyrannical CEOs since Neutron Jack went megalomaniac, and Musk has bought into the tradition. Wall St. loves headcounts reductions in particular, regardless of how many of the company’s bones are broken. A company can dump thousands of programmers, cancel thousands of projects, in turn generate thousands of expensive breach of contract settlements, replace revenue with losses, and it’s stock price will actually go up. Mr. Market is an idjit. Go figure.

        • SomethingStinks says:

          Replying to unamused: You are thinking logically. The stock price is completely fixed, stock runs so company execs and wall street vermin can sell to other vermin that buys the stock with other people’s money. The layoffs and bad decisions are like eating a double bacon hamburger… it will reduce a few moments of your life, but it sure does feel good right then. In my analogy the person eating the burger has to deal with the consequences at some point. The execs and the vermin will be long gone when the company has to deal with the consequences of the bad decisions. Look for the southpark clip ‘Andd it’s gone’. I used to find that hilarious now it just pi55es me off.

        • NBay says:

          That show was one of their best…..to bad it upsets you….I still laugh like hell watching it. Greatest sitcom of all time, bar none!

      • Mike says:

        What that doesn’t include are vaccine mandates that still exist in Tech companies for those who want to work in the office. My company still requires proof of vaccination for everyone entering an office. Saying “work in the office” with such a mandate in place, gives some people a hard choice. Admittedly for most tech workers the vaccine requirement isn’t an issue; but for a minority, it still is.

        • Greg Hamilton says:

          Mike,
          You just hit the third rail of online discourse. Good luck with your endeavors.

    • Brant Lee says:

      yeah, gotta love those blanket decisions that apply to all the rabble. Cozy.

      Will expenses be paid for $6 gas, commuting stress, new office clothes, two meals away from home, etc? These extra costs and total hours away from home will become very obvious now.

      • Harrold says:

        But standing around the water cooler and talking about big game coming up for the local sports team is invaluable!

        • Arizona Slim says:

          It’s community! Collaboration! And connection!

        • Anthony A. says:

          At least they are not on the golf course hogging us retiree’s tee times.

          Let them go back, commute and all, and actually do some work. Good riddance!

        • crazytown says:

          Anthony A., why don’t you get back to work and contribute to society instead of complaining about being inconvenienced while you play silly games? I bet you think people younger than you are all lazy and need less leisure time so that you can have as much leisure time as possible.

        • Halibut says:

          crazytown,

          Anthony has obviously never worked a day in his life. He was born with a silver putter in his mouth. So, you see, can’t “go back to work”.

          He’s really just like the rest of the old guys here. We’ve never worked and we never intend to work. When leisure is all you’ve ever known, you get good at it.

          It’s not like we’ve never *seen* anyone work. We just don’t get near them because they’re so far below us.

        • Anthony A. says:

          You guys are wrong (crazytown and Halibut). I worked until I was 74. Put in a total of 53 years, except for 4 years in the military with a free tour of Southeast Asia.

          I forgot to add the /s in the above post. But, really, it’s getting hard to get a tee time.

      • Flea says:

        Quit thinking people are entitled to this nonsense

      • 2banana says:

        Did anyone give $ back to their companies when the WFH craziness started?

        Here is a hint for you

        No one gives you anything.

        You get what you can negotiate.

      • Bobber says:

        I can see how returning to the office would be a problem for those speculative types who overpaid for a large new home far from their office, thinking (guessing) that WFH was going to be a permanent thing for them.

        Life is never that predictable.

        • Trucker Guy says:

          I hope so, it is stomach churning how these blowhards sit around and humble-brag about owning 2 houses, working from home whenever they want, owning toys like boats, campers, and fancy cars while living in mcmansions out in the woods. Then bitch and moan about how unscrupulous the country folk are and how they need to just pull themselves up out of poverty as inflation and gentrification destroys them. I find it hilarious how the local news talks about the resort type areas up here can’t staff the high end locations and the rich striver crowd have to wait in long lines or find places closed. It tickles me.

          I don’t care for Mr.Elon ” I had everything given to me thanks to apartheid South Africa and my rich daddy” Musk but I hope he starts the domino effect of companies mandating return to work. Get these uppity brats out of us poor people’s paradise and back to their miserable condos and city life rat races. I doubt it though, companies are probably more productive with WFH and also no office costs etc. Who knows. Only time will tell as always.

    • Tony says:

      Buck a trend? He is doing layoffs without actually announcing layoffs. There is not even enough office space for everyone to come back.

    • Random guy 62 says:

      I don’t like him but he is right from my view. Everyone I know that works from home jokes about how nothing gets done all day. One friend regularly cracks beers during online meetings, and he is paid $160k a year.

  7. DR DOOM says:

    Accord to current Gov’t data productivity rate of decline is at a “record” 1947 rate. Labor costs are as expected going up. Dunno what this has to do if any with finding a job where producing does not really matter but eventually Sumpin’ gotta give.

    • phleep says:

      Markets are awaiting the Fed’s next cave-in. The slightest Fed waffling, and they pop toward a new day of abandon and insanity. A weak Fed (Taper Tantrum, Big Flinch of 2018-2019, plenty of track record here, ever since Volcker) will give everyone an opportunity to deepen this decay. They have already taken it further than I could have imagined. Why do hard work, or conscientiously strive to hold onto a job, when money falls out of the sky for free?

  8. Duane says:

    Any financial or geopolitical crisis over the past couple of decades were all just blips on the radar. (As are the so called “plunges” happening today). Over the past 25 years markets have moved up substantially as evidenced by the incredible growth in net worth calculated by the Fed. With so much of the economy based on financial speculation, downturns can’t be allowed to happen anymore. Speculation is all we have now. And who can be against it when so much wealth is being created without actually lifting a finger? If people eventually can’t afford things anymore, so be it. “The Lords Of Easy Money” still hold court.

    • Nate says:

      Can’t take more easy money without creating a good panic to crash assets to buy em back on the cheap w all that free money.

    • 2banana says:

      The Japanese stock market enters the chat…

  9. CreditGB says:

    This is almost funny in a sort of tragic way.

    They separated the fools from their money, and now the fools are taking back their money. Now, suddenly they are worried about “the bottom line” ??

    What a sad, sad, circus this has become.

  10. Seneca's Cliff says:

    The scary thing is that the product ( or service) that many of these companies provide is a discretionary expense to other shaky business’s. Online advertising of dubious value, video conferencing services, etc. So it becomes a positive feedback loop as one startup cuts back spending on the services of another startup and their revenues dwindle faster than they cut expenses. Look out below.

  11. RM says:

    PayPal have also announced hundreds of layoffs in Ireland in the last couple of weeks . Jobs outsourced to India.

    • RM says:

      300+ jobs to be exact. Some will be outsourced. Some gone completely.

    • 2banana says:

      Jobs outsourced from America to Ireland.

      Now outsourced to India.

      Next will be to Vietnam or Uzbekistan.

      It’s just your turn.

  12. MiTurn says:

    “On May 9, Uber, whose stock plunged 64% from the high, made waves with its hiring freeze and cost cutting plans. Its CEO told employees in an email, obtained by CNBC, that the company would “treat hiring as a privilege and be deliberate about when and where we add headcount.”

    I have a nephew who works for Uber as a recruiter. He brags about making $200 a year and only working 5 hours a week.

    Sounds like he’s part of the problem.

    • 2banana says:

      Cheap and easy money created those jobs.

      Expensive and tough to get money will destroy those jobs.

  13. Comparisons need to be adjusted. This is a lot different than the dotcom bubble. Companies like Uber are consolidating fragmented industries, creating greater efficiency. At the other end of the tech bubble is METAaverse, which is tangible. My concern is the currency, based on a history of expanding debt, and policies to shrink that debt, hard to see how that plays out. The 1930s were a period of great technological innovation. Jobs are being automated away.

    • Augustus Frost says:

      Until it can consistently make money, Uber should be worth exactly zero. No amount of efficiency matters if it can’t make any money.

      The “metaverse” is a pretend fantasy alternate reality. It has as much substance as NFTs. Building a company around it is ridiculous.

      I’d also like know where all the technical innovation exists. Whatever has actually happened in the 21st century is marginal compared to the transistor, microchip, internal combustion engine…much less the wheel. The one time I performed a search recently, the supposed top 10 innovations listed were nothing significant.

      When asset markets crash and financial conditions tighten noticeably, there will be no need to automate jobs that never should have existed in the first place. That’s easily millions in the US alone.

      • Dan Romig says:

        Thank you A F!

        “Until it can make money, it ain’t worth shit.” is how I would say it.

        But, I was never very diplomatic. I blame the ice hockey of my youth …

    • RemoteWorks says:

      > Companies like Uber are consolidating fragmented industries, creating greater efficiency.

      They are unnecessary middlemen that take from the worker who delivers the actual product. The previous owner of my house never had a driver license, called the same exact driver each time it was desired or needed.

      The ENTIRE cost + tip went to the driver’s pocket. How is that less desirable than having Uber get a sizeable chunk of the worker’s pay? These new monopolies are accelerating the bad distribution of wealth and income.

      • PilotDoc says:

        This. When we Air BB in great place, we obtain the owners info and contact them directly next time. Cut out the middle man. They make more, we save more. Met some really nice people.

    • phleep says:

      ” … METAaverse … is tangible”

      Please look up tangible. That’s like saying solid is liquid.

      • phleep says:

        The metaverse is radially reductive (subtractive of richness of experience) on its best day, and radically subject to hacking, fraud and unwanted meta-mega-surveillance. Made to order for radical inequality. Worst propeller-head idea EVER.

  14. Carlos Leiro says:

    Hi everyone. Are the salaries of the people who are hired now the same or have they decreased?

    • QQQBall says:

      HI Carlos,

      My son recently interviewed with tech companies you would recommend. The offered salaries not to mention bonuses and stock. Just crazy. He told me what one of his buddies signed with and it was just insane.

  15. Not Sure says:

    Cost cutting eh? Outsourcing is always way up the list of cost cutting methods when budgets get tight.

    The work-from-home crowd seems to be largely blind to the fact that they will be the first on the chopping block now that they’ve transformed their job format to be highly mobile and they’ve proven their job can be easily outsourced. Denial is powerful, and no, the skill sets they think they have won’t save them… Skills are almost meaningless if a worker is spending 75% of their attention on babysitting, watching TV, and losing money trading tech stocks and crypto.

    In-person face time with your boss matters, and it’s much easier to lay somebody off remotely.

  16. Swamp Creature says:

    Goldman Sucks says this year is an exact analog to the year 2000. NASDAQ crash followed by rebound and then another crash and a recession. I agree, only instead of a recession I see a depression with inflation continuing at double digits.
    Where is Wolf’s gas station from Heck? Haven’t seen it in a while. Needs to change the name to the “GAS STATION FROM HELL”.

  17. Russell says:

    Sucker rally today; NASDAQ up 2%

    • The Real Tony says:

      Coincides exactly with the DXY dollar index at 10:26am. For the people that haven’t figured it out yet the big bear market rally will happen a day or two after the May CPI comes out hot one final gasp for the U.S. dollar before it goes on an endless decline. The entire bear market rally will be all related to the falling U.S. dollar. Looking at, at least 35,250 on the DOW short term and 36,500 nearer the end of this year. The bear market rally should take us into January 2023 and then end around the first week of January 2023.

      • Tony says:

        A bear market rally doesn’t last 8 months, the average length of a bear market is only 9 months.

        • Wolf Richter says:

          The dotcom bust lasted 2.5 years. It came with a 35% Nasdaq bear-market rally in the summer of 2000 that pulled lots of people into the market, who then got wiped out. Nasdaq ended at -78%. And then, back in March 2009 it was right back very close to the low of the dotcom bust and back where it had first been in something like 1997, and only huge amounts of money printing, which started in late 2008, got it to shoot higher. Now the money printing has ended and QT is starting, and there is a huge amount of inflation that will make sure the Fed keeps raising rates and doing QT.

        • Augustus Frost says:

          This is the biggest mania in history, not even close.

          The upcoming bear market will be of comparable size.

          The current social and economic fundamentals are mediocre to absolutely awful, in case anyone needs a “reason” for it.

          The 1966-1982 bear market lasted 16 1/2 years resulting in about a 23% nominal loss and 75% inflation adjusted loss in the DJIA. There was no mania in 1966 and the fundamentals were vastly better then versus now.

          Anyone can make of this what they choose.

        • Iona says:

          And RE crash just getting started and this RE bubble is the largest ever, period. The stock market bubble arguably rivals that of 2000

        • Don says:

          Wolf – gotta remember that Bernanke was pumping the housing bubble before the dust had even settled on the tech rubble. Our centrally controlled economy produces bubbles and crashes on command. What will the next bubble be? Vapor?

        • Augustus Frost says:

          Iona,

          It’s the same stock market mania from the 1990’s, as it never ended.

          The dot.com bubble excesses 22+ years ago were already bigger than any other in history. At that time, the global credit mania was already in place though not nearly as bad as now. Most global stock markets were also in bubble or mania territory.

          It’s collectively worse now because the disconnect between valuations and long-term fundamentals (which are awful) are unprecedented.

          Compare the economic background and more importantly, social conditions. Economically, no ZIRP/NIRP, no QE, and limited to no fake “growth” from government deficit spending.

  18. Maximus Minimus says:

    One of the social media companies, LinkedIn was swallowed by Microsoft, so there is no separate reporting. It has evolved to more of a social nuisance company, and I hasn’t been missing it for a decade or so.

    • MiTurn says:

      “social nuisance company”

      MM, well stated. Sounds like Facebook. I hate it when businesses use FB for their business website rather than having a website available to non-FB people. They don’t get my potential business.

      • Maximus Minimus says:

        Regarding Facebook, I know what you mean.
        Years ago, I created an account because of a class action I was following.
        I am probably still counted as a user.
        As the saying goes: you are not dead until LinkedIn says you are.

  19. RemoteWorks says:

    So out of topic, sorry about that. Just read this on today’s Financial Times and had to share: “Prices charged by industrial producers in the 19 countries that share the euro rose 37.2 per cent in the year to April, up from March’s all-time high of 36.9 per cent, with wholesale prices of consumer goods such as food and drink contributing to the surge, according to Eurostat data released on Thursday.”

    NONE of the key decision-makers are well regarded monetary policy experts, notably, NOT EVEN MACROECONOMISTS!!!

    Jay Powell – bachelors degree in Politics, doctorate in Jurisprudence.
    Christine Lagarde – bachelors and masters degrees in Law.
    Andrew Bailey – bachelors degree and doctorate in History (PhD on Lancashire cotton mills during the Napoleonic wars).

    Thank God for permaculture, or I’d be freaking out when you add the fact that California’s Central Valley is collapsing.

    • Ccat says:

      “ California’s Central Valley is collapsing.”

      Yep. I am a farmer, a real one. I have been spending down my retirement savings to keep my farm afloat for years. The tax that they are going about to put on groundwater useage will finish me, and many others, off.

      They say they can stop the valley floor from collapsing any further by taxation.

      Yeah, right.

  20. Crush the Peasants! says:

    A collapsing house of RSU’s.

  21. OutWest says:

    I’ve worked in tech pretty much my entire professional life, both in the public sector (15 years) and in the private sector for the past 9 as a self employed IT consultant.

    Have seen a few nasty tech busts.

    Right now, state governments are still flush with cash transfers from DC due at least in part to the panemic state of emergency which is currently scheduled to expire in July. States will be given a 60 day nice before the cutoff which is when I expect the real bottom in tech to fall out.

    When states start cutting back, tech will tank once again to breathtaking lows. For anyone working in tech, it’s important to save and prepare.

    • RedRaider says:

      Yea, but how much can you save and prepare in just 60 days. I think your goose is already cooked.

      • OutWest says:

        RR, my goose (if I had one) will be fine since I’ve been saving since my mid-20s.

        The point of my comment was that when pandemic related payments to the states are discontinued at the same time state revenues are collapsing, IT budgets get slashed and projects get cancelled.

        I’m not seeing that happen ‘yet’…

    • Ben says:

      From what I’ve read most states have not even begun to use their Covid money. Many of the funds set aside as aide to renters was never distributed.

      I read in one article that California distributed a substantial amount of aid to fund their police departments.

      There is a stealth second wave of stimulus that is coming. Everyone that matters has too much money. You can just watch the price of gold realize that. The only way to tame the inflation beast is with higher interest rates and Powell has made it clear he’s not going to stop the party. The fact that inflation in my life is 15-20% and I still get 0.1% interest in my checking account is absurd. There is absolutely no reason to have a central bank if all they can do is think of new excuses to boost asset prices for the 1%.

      I wonder if when Powell met with Biden he promised to release some of that TGA money directly into the S&P 500. Could be the S&P hits 4700 even quicker than I imagined.

  22. Johnny5 says:

    Realtor.com released their May 2022 inventory data today. If you want to see how quickly a hot market can reverse, take a look at the data on the Austin metro area. The market has decelerated quickly in the span of 3 months:

    Active inventory in May 2022 is up 86% from May 2021, and now “only” down 51% from May 2019. Compare that to just 3 months ago (February 2022 inventory data), when active inventory was only up 1% from February 2021, and down 79% from February 2019.

    New Listings for May 2022 were at 4,984, which is the highest monthly new listing count for the Austin metro area ever in their data (the data only goes back to July 2016 though).

    I don’t know how much of this slow down is being driven by the Tech bust, but it certainly can’t be helping.

  23. The Colorado Kid says:

    My little town (temporarily) in SE Utah has had a bunch of new listings come on with almost no new sales, and there’s virtually no tech jobs here, unless they’re WFH, and I doubt even that, as it’s not the kind of place one would come to unless you had family here, etc.

  24. Max says:

    The terminology consistently used in the media for “SPACs” is wrong, including above. You all mostly mean deSPACs. SPACs are fully funded trusts, have no going concern issues, and have very stable public values. When bought below NAV and sold/redeemed at NAV prior to the deSPAC or liquidation, they provide a treasury+ positive return. After the deSPAC, it is no longer a SPAC. The surviving entity is an operating company. Every mention of SPACs in your article were referring to deSPACs, not SPACs.

    • Wolf Richter says:

      Splitting hairs. We also talk about “IPO stocks.” Everyone knows what we mean even though it’s not technically correct. And we’re saying, “I’m going to google it,” when in fact I’m using DuckDuckGo. So have fun with your hair-splittery, seems you have nothing better to do.

  25. George W says:

    I started working in San Francisco on the CSAA account during the Dotcom boom/bust. I started work on Sept of 1999 by May of 2000 it was all over.

    Initially, I was offered all sorts of perks and bonuses, since I was flying in from SLC. I would stay at the Holiday Inn on the Wharf and walk the Embarcadero everyday to work, no need to ride a bus. Things turned South very quickly. In December, Wall Street was punishing companies who’s business plans were not ridiculous/outrages enough. By March many business were being shuttered and the chatter in the bars was all about layoffs and poor employment prospects.

    Jamie Dimond is talking about the economic hurricane that he sees brewing. Jamie is right, QT will be devastating to the economy.

    As the Fed ramps up QT to 95 billion, I would be interested in knowing the projected losses per month that the Fed will not be reporting.

    Whomever the Fed sells their treasuries too, it will be at a substantial loss and the Treasury Dept. is still obligated to pay the full amount through maturity.

    The MBS unwind seems even more problematic. As housing prices fall and interest rates rise the underlying securities will lose much of their value. Who is the Fed going to sell this stuff too?

    The Fed will eventually have to reverse course and lower interest rates and stop QT.

    • Ian B says:

      “Whomever the Fed sells their treasuries too, it will be at a substantial loss and the Treasury Dept. is still obligated to pay the full amount through maturity.”

      I believe QT will simply allow select Treasuries and MBS to reach maturity without reinvesting the proceeds. Thus no actual selling will occur.

    • Cookdoggie says:

      “Jamie Dimond is talking about the economic hurricane that he sees brewing. Jamie is right, QT will be devastating to the economy.”

      Which is why so many believe the Fed won’t get far with QT. The Fed has mandates for price stability and low unemployment. Which one do they prioritize if both go off the rails, which is what I think QT will bring. As a nation we are now incapable of accepting pain, discipline or responsibility.

      Wolf chastises what he calls QT deniers, but it’s all about matters of degree. Sure, they will start QT. How far will they get? That’s where the disagreement is. What a great story this will be to follow. Popcorn!

  26. unamused says:

    Computing technologies, particularly those which are internet-based, ran out of useful applications twenty years ago. I don’t consider social media to be a ‘useful application’, and it’s hardly new anyway, what with Usenet and online bulletin boards dating from 1979. Remote ordering and delivery systems date back to the Sears catalog over a hundred years ago, no computer needed.

    So what’s happened in the meantime? Since everything that actually helps has already been done, tech has largely become a solution in search of problems: firms already have the products and services, but to make any more money they have to create markets for them.

    And so it invents them. There are many examples, more or less useless, like internet-connected refrigerators, vehicles with tech gadgets most people will never use because they’re not needed, and flashy websites that have to be avoided because it’s gotten too hard to get past the layers of advertising to get to the flimsy content. Taxi services like Uber and Lyft that bankrupt the drivers and make no money themselves. Lame delivery services for Americans who are too lazy to cook. GPS tracking services for your cats. And so forth.

    After the twentieth Avengers movie the CGI effects get boring no matter how cleverly they play them. The remake of the Day the Earth Stood Still was bad enough, but if they remake Logan’s Run or Forbidden Planet or Earth vs. the Flying Saucers I’m going to hurl. And how many shoot-’em-up video games and sim games can one actually play, anyway?

    I’m off to play softball. I’ll be in center field. You guys can do what you want.

    • rick m says:

      GPS equipped cats? My neighbor lady needs it, with Class C transponder enabled. Of course the 7700 button would be getting mashed all the time, cats are terminally self-centered, like some general aviation pilots. Stepped away from flying after I realized I wasn’t any good at it and wouldn’t ever improve much. the skies are safer for my absence.

  27. otishertz says:

    “…develops its Windows operating system…”

    More like devolves it’s operating system.

    I was happy with XP pro. I’ve gained almost no new functionality with the new versions, only the ability to poke my finger at a touchscreen.

    Every time there was a forced update it would shut down all my irrigation, even after I set it to not update. Jumped though hoops with alarms and remote access to turn it back on in the middle of the night. Ultimately had to go to standalone systems.

    How do they expect people to use their OS for critical operations when MS can shut down your system without warning? BSOD was bad enough.

    Linux has evolved to where I don’t need anything else. I still probably have Windows in an dual boot hard drive somewhere in case I have to use a legacy program but that hasn’t happened in years. Everything is web or app based now.

    Ubuntu or Mint work fine on most PCs and are a good way to revive older hardware that’s still functional. You can even use the poke screen.

    Can’t stand bill gates, his bad haircut, and his eternal smirk. Why hasn’t that guy ever grown sideburns or facial hair anyway?

    • unamused says:

      “BSOD was bad enough.”

      Microsoft never did fix their leaky OS kernel, even in Win 10, after all these years, because the original design was defective and they have too many path dependencies with later versions to start over.

      “Why hasn’t that guy ever grown sideburns or facial hair anyway?”

      He stopped generating testosterone six months into puberty. It’s a geek thing.

  28. Serge says:

    So, should I go back to Ukraine? :)
    A little funny, 3 years ago I read articles about upcoming recession and I thought “damn, it will be pretty hard to find a job…”. I came, continued to work as freelancer… and then BOOM! the pandemic, well, recession may be not that bad, I thought :)
    So now all these articles about freezes and lay offs… going to be panic, right? Slower hires, market full of engineers… no toilet paper on the shelves.

    • Wolf Richter says:

      There was no recession during the first entire year of the dotcom bust. We’re not in a recessionary economy either. The labor shortages persist. Consumers are out-spending inflation by a good margin. This is just like the dotcom bust… the economy was fine for a year, and then there was a mild recession. That said, the local economy in San Francisco and Silicon Valley took a deep dive.

      But this one is different: now there is huge inflation, and the Fed is going to deal with it.

  29. Peter J Stubben says:

    ‘Blood in the Streets’ — uh-oh!!! — buy, Buy, BUY…PJS

  30. andy says:

    We need a lot more than another tech wreck and housing bust.

    What we need is a long term depression in the MIC complex – where major US defense companies go bust because there is no demand for weaponry.

    • unamused says:

      The “demand for weaponry” isn’t relevant. It’s mostly corporate welfare, like most federal spending.

  31. Jackson Y says:

    The excesses haven’t been wrung out of the markets. The Dow Jones is no longer in correction, down only 9% from its 36,799 record close. Amazon shares just climbed from $2,000 to $2,500 within a week, on no news besides a pending share split. GameStop reported a $147 million quarterly loss & its stock shot up by 10% to a $10B valuation.

    The vast majority of “imploded stocks” – and where most of the recent layoffs & hiring freezes are coming from – are of 3rd & 4th tier pre-profit & pre-revenue companies that arguably should never have been allowed to go public. They’re too small a slice of the market to make a dent in the overheated broader economy.

    • Wolf Richter says:

      Nearly all (with very few exceptions) of the imploded stocks I discuss have lots of revenues, from Netflix on down… Palantir, Carvana, Vroom, Zoom (even has earnings), Uber, Lyft, etc. etc.

  32. YuShan says:

    “But the whole thing has changed. Their stocks have come down hard, and suddenly expenses matter. And one company’s expense is another company’s revenues; or is an employee’s income.”

    This is a very important thing that not everybody realizes. It is not just the “wealth effect”. The stock market bubble is really a kind of money printing machine when you can simply issue more unicorn stock to pay for your cash burn. And when that stops, many people that were selling goods and services to these companies lose their non-investment (i.e. EARNED) income.

  33. YuShan says:

    “To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.”

    — Paul Krugman, 2002

    Unfortunately we already have a housing bubble, so no solution for Nasdaq bubble 2.0.

  34. David W. Young says:

    All of these pronouncements from Big and Little Tech management that outright headcount reductions, also known as Layoffs, are not currently planned is as trustworthy as the Fed’s “stated” determination to tame runaway inflation. Looking inside the belly of the beast, known as the Executive Offices, one can see the handwringing going on as Stock Option Compensation becomes the equivalent of a Bic pen that has run out of ink. Worthless.

    These stock price declines are reminiscent of the Dot.com evaporation of values in 2000 and 2001. So in order for our generally grossly-overpaid executives in Corporate America (certainly in relation to the troops in the trenches!!) to continue to make their Lamborghini, Maserati, and Hampton Castle payments, they need to do whatever it takes to justify their base compensation salaries for one, and to throw fuel on the fire for a dead cat bounce in their company’s deflated stock prices at a minimum/ two. Headcount reductions are historically and repeatedly the easiest cost reduction measure that even an unenlightened executive can make to improve the bottom line.

    Now we have such stalwart unentangled institutions as Goldman and Morgan espousing the increasingly real probability of a bona fide Recession even before the turkey pops out of the celebratory oven, and a very dark cloud begins to come over the ever-sunny existences on Wall and Broad (not to mention the unanointed ones on Main Street). None other than Jamie Dimon of one of the top five Financial Squid on Wall Street is talking about an economic storm on a level with Hurricane Sandy. Yikes. Grab the children, the pets, and maybe the mother-in-law and head for higher ground, if not the mountains.

    As the illustrious stock market, maybe not a perfect forecasting tool, but much better than Federal Reserve forecasts of any economic metric, is foreshadowing (with the Fed having barely begun its so-called Monster Tightening Cycle), folks, that we got real trouble right here in River City.

    We will start hearing Tweets about lay-offs by the end of this summer, and not just in Tech World. The world economy is heading down ……. too much inflation and debt service requirements with ever constrained abilities of consumers to keep buying as in 2020 and 2021. Not to mention their losses of confidence in most matters du jour.

    This easy money cycle set new universe shattering records for largess. The light at the end of the tunnel is truly an oncoming train of Reset.

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