But the layoff announcements across tech and social media were effective in re-explaining to workers who the boss is.
By Wolf Richter for WOLF STREET.
One theme has become clear: The huge tech and social media layoff announcements that were thrown propaganda-like at the labor market have not panned out in reality. They did hammer perhaps some humility into job seekers and job switchers and just regular employees seeking raises, and those all have calmed down. But that massive reduction in tech employment has not happened. There were some layoffs, while through the other door, the same companies have been hiring, and the net reduction in employment has been much smaller than advertised.
So let’s look at Alphabet, which in early January made headlines by announcing that it would lay off 12,000 workers globally. Today in its 10-Q filing with the SEC, it disclosed its Q3 staffing levels and that the layoffs were finished: “As of September 30, 2023, we had 182,381 employees. Substantially all of the employees affected by the reduction of our workforce were no longer included in our headcount as of September 30, 2023.”
On net, since the beginning of 2023, Alphabet has cut its headcount by 7,853, instead of the 12,000 in layoffs announced in January.
So then its total headcount, after having added 55,000 employees over the prior two years, and after having announced 12,000 layoffs, dropped by just 7,853 this year:
- In Q1, rose by 477 people
- In Q2, fell by 8,913 people
- In Q3, rose by 583 people.
This kind of thing happened across many tech and social media: Fewer layoffs than advertised, and most of those people that got laid off found jobs quickly at other tech and social media companies. There was some churn, but it didn’t bring mayhem to the labor market.
Twitter/X may be the big exception: Gutted by Musk, it has largely remained gutted despite some hiring since then, leaving observers to wonder what all these people had been doing anyway.
As Alphabet shows, the tech-and-social-media layoff drama is now largely over, and they’re hiring again, which explains the dropping initial claims and continued claims for unemployment insurance, after the rise early this year, which I discussed here: My Favorite Recession Indicator: No Recession in Sight Yet.
Here’s that recession indicator. The green line needs to rise to the black line:
It did let out some of the pressure for ever bigger and fatter compensation packages in the sector. And some folks, after having been shaken up by the layoff announcements and the actual layoffs, are now less likely to quit, and are even grudgingly returning to the office a few days a week.
So the strategy of this huge wave of – concerted? – global layoff announcements in the industry was effective in re-explaining to workers who the boss is, and it allowed companies to get rid of some deadwood, and cut some costs.
But cutting costs isn’t cheap. Alphabet in its 10-Q today outlined the costs of the efforts to “re-engineer our cost base”; it included severance costs associated with the layoffs and the costs associated with the reduction of office space. Amounts so far this year through Q3:
- Severance costs: $2.1 billion.
- Costs of office reduction: $856 million, including $649 million in “exit charges” to get out from leases and $207 million in “accelerated rent and accelerated depreciation.”
Shares of Alphabet [GOOG], for reasons related to its earnings report last night and not to these disclosures buried deep in the 10-Q filing today, kathoomphed nearly 9% at the moment.
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There is a difference between sailing a ship and keeping a ship from sinking. X is sinking.
Is x sinking? How do you know? Maybe it is…. At least the twitt was torpedoed. On to the next propaganda machine.
Yea Musks claims that they didnt need any of those people or that they would soon be on the path to bankruptcy seemed to fail to understand how Twitter was profitable for several years. Ads. And advertisers care about brand safety and campaign performance. It takes a lot of work for account owners to keep up with advertisers requests for data and tweeks, its rarely all self service. As someone deeply familiar with ad tech and its ins and outs avertisers are paranoid about brand safety. They want constant updates to the logic of where and where not their ads can be served. We had a client running a campaign for a “flame broiled” food item, which loaded before the news video on a article related to a woman who burned alive in her car. They were not happy. Would anyone really associate their brand with doing this deliberately? I doubt it, but they dont care. Ive here several horror stories of people who simply can no longer get metrics on campaign performance from the twitter platform. Eventually you lose high CPM campaigns to people running ads who simply dont care, the “Doctors hate this one trick” type ads and the like, and users notice. Revenue decreases. Its hard to know twitters numbers for sure but Musk himself has says they are not good. He likes to blame the ADL for running a pressure campaign but I highly doubt thats the reason. Most advertisers have this motivation on their own and about content far more banal than antisemitism. This is ignoring all his other cuts to regulatory compliance teams which has him in hot water with the EU. Sure these people are not needed, until the lawsuits start. Then you have a FTC order mandating they exist. In fact, Twitter had (has!) one before he bought it, and the fine from that settlement was the reason they were in the red that year. It was not small.
So did you move ad dollars to Threads? Are there other people on Threads? Do they allow page long posts?
X was left with massive legacy costs that he refuses to pay
I wouldn’t doubt he does a pre-packaged BK in next year
then moves on as usual
Herpderp, would love to have a deeper conversation with you about the Ad Business and tap your expertise! I’ve been building an Ad Model that I believe will have a significant impact on the industry and I might be able to make it worth your time to help. Let me know.
Off ToPic, great read as always Wolf! I look forward to reading your stuff every weekend.
It’s pretty hard to know what’s happening with X because it’s a private company. But it is shocking that Musk cut 75% of the employees and aside from a few minor bumps, the business appears to be working. If Meta had 1/10th of that discipline they would jettison the stupid VR and fake worlds part of their business and get back to their core social media stuff (which is also crap but very lucrative crap).
With all due respect, if you think Twitter is ‘working’ I question how much you ever used the site. Significant parts of the site simply don’t work at all anymore, and even the parts that do mostly work are degraded.
The site is chock full of spam. There’s examples of people asking corps for support and getting tons of responses from bots. The only actual value of a software engineering organization is in its people – in that organization. Musk destroying that has also destroyed the value of the company. The rest of the world is just catching up to reality.
You are correct, I am a very infrequent X or Twitter person, there could be problems I’m not familiar with. But as an outsider, their problem seems to be advertisers cutting back, the basic technology of Twitter isn’t exactly rocket science.
“The only actual value of a software engineering organization is in its people – in that organization”.
If you want to be specific, the only actual value of a software engineering organization is its software.
Now in general, yes. People is the only actual value of ANY organization.
“X is sinking”
Oh, really? How do you know this? This sounds like wishful thinking, because the company is private and doesn’t report earning.
active users are sinking, but more importantly the user experience is getting worse and worse.
And Xhitter keeps breaking. Remember the DeSantis running anouncement?
I doubt very much that less people interacting less with the platform is somehow profitable.
Even if true that active users are sinking, it is a transition period with migration of users base, which is expected when a platform is shifting its business and vision.
I’m not a regular active users there but lots of significant political and geopolitical-related activities happen on the platform. It is THE platform of choice for that.
I’m not convinced at all that it is sinking. There is a concerted attack on X from the established media. But as far as I know, no media outlet or public figure dare outright stop using it.
My bet is that Musk will prove people wrong, again; and I’m far from a big fan of his.
Int – akin to that observation of ‘…rarely going broke if assuming the worst from your fellow man…’?
may we all find a better day.
It’s all propaganda now isn’t it? Announce layoffs to boost the stock and to get the workers anxious, then really don’t change numbers.
I would cut all of these parasites off, most of their tasks is to invent how to show my eyes more advertisements and to code and force me to use apps for something that I can open with my Firefox.
I have to agree. I have never used Twitter/X, Facebook, Snapchat, TikTok, etc. It is not appealing to me. I guess I am capable to keep focus for 5-10 min. and read an article? alas wolfstreet.com.
For me all that social media garbage is for people with short attention spans. If I had an aneurysm, God forbid, and I had to choose one, I would go straight up to TikTok.
15 secs. One person singing “the message”, with flashy things bubbling up the screen. The epitome of them all!!! Straight to the root, baby!!!
Seems like the last graph needs to account for the increase in population (labor force) from 1972 to 2022. Such an accounting would make Wolf’s recession probability a lot less than it is. US population 1972 was 210 million, in 2023 it is 340 million.
Yeah we can come up with a new metric, like the ratio of unemployment to employed age 25-54. That would make this time look so much better.
I like to tell people that the U6 is the number to look at.. only two times since it’s inception has it hovered around 7%. Now it’s the third.
It’s been hovering around 7% since March of 2022. What’s your point?
Kurtismayfield,
“only two times since it’s inception has it hovered around 7%. Now it’s the third.”
So to clarify, todays U-6 rate of 7.0% is near the record LOW. 22% is the high.
It’s an indicator only for amusement purposes because:
The # of people that come on here to spout BS never ceases to amaze me. You can tell most of them have never been challenged by anyone with more than a two-digit IQ, and it’s clear they’re so used to spouting their BS to a bunch of other low IQ folks clones that don’t challenge them. If Kurtis actually told “people that the (sic) U6 was the number to look at”, I wonder how many times he spouted that nonsense before both of us pointed it out.
I’ve noticed that there are 3 BS posters/perma-bears that have disappeared (Petunia, GameTimeTV (or something similar) and another one that escapes my memory), and I can only imagine it’s because they’ve been banned or they got the message when their posts have been deleted. Thank you for all you do.
JD,
They have not been “banned.”
Wolf,
The way the U3 calculated “discouraged persons” was changed in 1994. So comparing that to historical data prior to 1994 isn’t really useful either for recession predictions.
Kurtismayfield,
I’m not using ANY unemployment rates at all, period. Read the article I linked above about “My Favorite Recession Indicator.” All unemployment rates are household-survey-based figures. I’m not using ANY survey-based figures.
I’m using actual unemployment insurance claims, which are actual monetary claims by actual people who got laid off. That’s why I’m using them. And they’re weekly.
It would really be helpful if you read my stuff before tying up the comments with this nonsense.
William Leake,
You’d think so, and I’d think so, but it didn’t do that in the past. And there is no reason to assume that it will in the future.
Each recession since early 1980s (excluding the lockdown) began when continued claims for unemployment insurance spiked through about the 2.6-million mark (black line) — despite big growth in population, employment, and labor force over those years.
That’s just how it is. This is a predictor based on very regular well-established past behavior going back four decades. If it’s adjusted, the recession would kick in later, at much higher unemployment insurance claims, such as 3 million, and so this recession indicator would give us even more warning time. But that just hasn’t happened yet.
There could be some variable whose secular (a.k.a. long-term) trend offsets population (or labor force) growth. It would be interesting to know what that variable might be. The usual suspects are technological advance and/or capital accumulation. One would need to think about this, probably a lot. And then test the model using multivariate analysis.
It’s not to say the Twitter X employees were useless. We can either assume they were extremely necessary or not necessary at all. If they were extremely necessary then Musk is not smart for getting rid of them.
Perhaps they were there to help the company grow into the future and like some alcoholic or smoker he has stunted his growth and assured an early death.
If they were unnecessary, then the company should run smoothly with no bad headlines … oh wait. There have been a ton of those, bad headlines.
Anywho. Tech billionaires, what can you do?
And about the Google hirings: these firms compete for the creme de La creme employees. They hoard them like rare baseball cards to keep them from the “Other Guys”.
I think they were trying to play ball with Jerome about lowering inflation and then one of them broke the non aggression pact.
Anywho. What can you do? Tech Companies
Inflation will continue if there is no recession and I predict it will increase. All Americans who are wealthy enough should just do what the richest 1% of Americans do to deal with that: create a foreign trust in a British Commonwealth tax haven then transfer all of your income generating (or all of your) assets into it. The fact you no longer own the asset means you do not have to pay taxes on the income from it. (If you have assets that have substantially increased above their basis and are old, you may want to hold them and pour them over into the trust only after you die, for your family, so you get a step up in basis and use up the US estate tax credit.)
You are the trustor (trust creator) and make yourself the trustee (provided that is allowed in the country you create the trust in), so you can invest any liquid assets in the US, etc. To avoid the trust, itself, having to pay miniscule, income taxes in the tax haven country, which competes with other tax havens to keep those low, just hold non-dividend paying, US or EU companies. Your trust then only has to pay miniscule, foreign, income taxes when it sells its shares.
You can also have the companies your trust owns hire you for a nominal or zero salary, then they can get you a personal, private, corporate-paid, tax deductible, beautiful, well-paid, personal “assistant” to relieve you of your tension every day, free corporate-luxury condo/mansion housing, free $2000 meals each day, free corporate, private jet travel, free corporate vehicles, etc., etc., all TAX DEDUCTIBLE by the company. Watch the SBF trial; his use of these corporate benefits is very, very, very common now also among the rich.
That is how you can beat inflation, by legally avoiding US income taxes— like the ultra rich have for many decades! If we ALL do it, maybe the IRS and crooked politicians will finally close the loopholes, eventually, probably when the richest 1% figure out a new scam to avoid paying US income taxes. (P.S. be careful which lawyer drafts your trust, and make your family the beneficiaries; I saw so many that were so badly drafted!)
Also, if you create a foreign trust to hold your income generating assets and so avoid paying US income taxes, beware: the bankers love scamming the funds out of trusts if you are stupid enough to designate a bank as your trustee. Every time a banker thinks of it, he will charge your trust outrageous, fake (crony law firm) legal or other fees, or take its asset: e.g., if your trust bought Amazon (via the bank for the trust) or some other company and it then increased in value to 100X its purchase price, all records will be rapidly altered to show the bank was the one that made the purchase for itself. LOL
Do not put mice to guard your cheese and do not put bankers to guard your money!
Their stock price only kathoomphed? No biggie. Now, if it gets thackamuffled, then we know it’s in trouble!
Just watched video parroted off Google Finance about a rich recession.
Absolutely hilarious. The top 25% or so earners are single handedly keeping the economy afloat. These people are making a killing off their growing treasuries portfolios.
The last thing I’m worried about is the rich in terms of a recession. The bottom 50% are getting hammered. They’re the ones in a recession.
They consider it a “recession” when the S&P isn’t going up by 20% per year. The stonk market has gone nowhere now for 2 years, which for the “rich” is a catastrophe.
TomS,
You forgot the sarc tag. The bottom 50% have gotten the biggest pay increases over the past three years — that has been well established now — and that’s where the labor shortages are or were. Look at what unions are now doing. And those people are out spending this new money they’re making.
If you refuse to see reality because it doesn’t fit into your narrative, you will never understand the US economy.
“Look at what unions are now doing.”
Walking off the job? Not something to be proud of, IMO. The UAW workers should be fired and replaced. And the Big 3 should all go BK as well. The entire situation is a giant sh!t show. They don’t produce products that people can afford anymore. Henry Ford is rolling in his grave.
Toyota and Honda make tons of great cars in America.
The “Big 3” and UAW are obsolete. Everybody knows it but them.
I’m not an expert on these companies but wasn’t that brief downturn related to a downturn in online advertising? That’s what Alphabet and Meta really are dependent on. If ads dip, they will have to cut back. Pretty simple.
Even at full staffing I never understood what X was about, nor FB for that matter. Perhaps I am just old school! They all feel like mass marketing/propaganda tools for the most part with almost zero value add.
Dow down today around 100pts…
But the NASDAQ was down 300 + and the SPs down 60!
Those are big downs……
Watch APPL …. bad looking chart.
Could we have a slow growth / recession with full employment? If labor does not get increases, the GDP could mathematically still be lower in real terms? Could this happen because of demographics and population?
Did Japan have massive layoffs / unemployment during slow growth periods?
The hiring process is also expensive due to onboarding costs and inefficiencies due to the learning curve. Massive hiring/firing both can have drawbacks.
Googler here. Small anecdote to show that these laid off engineers don’t even have to go to another company: one engineer from a sister team of mine got fired in January. He was back at G in April, in my team now.
I don’t think there’s a concerted strategy. Everyone (in the popular media) was panicking over the then huge rate increases and every news article was claiming a recession was a quarter away. So the companies tried to get ahead of it by reducing staff, but the recession predictions didn’t come true: instead more sustained demand than was anticipated, so they’re hiring again. Oops, a costly HR turnover mistake.
The chart has returned to where the curve would have been if the pandemic and QE hadn’t made everyone lose their minds.
All indicators are the economy is great. Rates are going to have to go higher to tame inflation.
Wolf, Meta said in today’s earning call that they’re seeing advertisement softness in October possibly because of the middle east war. Would that war cause a recession?
Depends, there are always winners and losers. A war would likely drive up oil prices significantly. Some companies will do well, some won’t.
If you think a war is likely, there are plenty of ways to invest with that in mind.
But back to your question “would that war cause a recession”? Meta didn’t say a war is causing softness in their business. They said UNCERTAINTY surrounding the war is hurting their business. Two things:
1) Businesses crave certainty. Bad news (unless it’s catastrophic) is often better than uncertainty.
2) Analysts are always looking for a reason to explain why a stock went up or down. So instead of saying that people took profits after Meta crushed expectations (which is more likely what happened) OR that the market as a whole was down big today and the algos just started selling Meta, they want to connect some random thing that Susan Li said today with its after-hours performance.
Meta is seeing advertisement softness in the Middle East, not in the US. This impacts Meta, not the US economy.
Wolf, Meta said “We have observed softer ads in the beginning of the fourth quarter, correlating with the start of the conflict, which is captured in our Q4 revenue outlook”. So it’s not Middle East which Meta doesn’t have much of exposure. It could also be the long lag impact of higher rates finally hitting consumers and businesses in the US.
1. Advertising never causes a recession. It’s not big enough. Advertising may go into a depression, and it won’t cause a recession. And Meta talked about “demand softness” – about slower growth, not a decline.
2. So revenues jumped 23% in Q3. The mid-point of Meta’s guidance for Q4 is now 19% growth, to $38 billion, compared to a year ago ($32 billion). They’re talking about 19% growth, but that growth is 2 percentage points lower than it would be otherwise (+21%). So this is still huge growth. I don’t understand why “recession” even occurred to you in this context. People are obsessed with “recession.” They see a recession in every slice of cheese.
What are Meta’s other income streams and what percentage of the whole is advertising?
$33.6 billion in advertising revenues out of $34.1 billion in total revenues.
Broader than tech, CA is definitely slowing down on payroll adds over the TTM…
https://www.deptofnumbers.com/employment/california/
(Btw, thank you God for getting DoN updated after a few months of no updates…the BLS is the ultimate source of the data, but DoN makes it a lot more user friendly and easier to access cross-state data in a comprehensive way).
No, that’s not what your link says. Your link says that:
1. the Establishment Survey (of employers) shows that payroll type jobs grew to a record in CA. No slowdown at all. So this is where Google jobs fit in.
2. the Household Survey shows that the number of people who are working, including gig workers and the self-employed, has dipped a little.
So more payroll type jobs, fewer gig worker jobs.
California has lost population since March 2020 as people moved to cheaper states, and inflow of immigrants wasn’t enough to fill the gap. The population loss has been biggest in San Francisco. It’s still immensely crowded though. This explains the dip in the household survey data.