Welcome to another week of trading! Today, we’re going to look at the recent tech layoffs and see how they impact the markets, both from the perspective of the companies themselves and the wider economy. After that, we’ll list the (many) top fundamental events that you can trade this week. Let’s get into it!
Twas the season of tech layoffs
Q42022 wasn’t the best for many in the tech sector. With recession signs creeping in, many companies took some difficult decisions with thousands of employees losing their jobs. Since then, the macro situation hasn’t exactly improved, meaning hundreds of thousands now live in fear of the same.
But what impact does all of this have firstly on the companies themselves, then on the economy at large?
Tech layoffs — how it’s impacted the companies
According to layoffs.fyi, 1,203 tech companies laid off over 154,000 employees in 2022. More than 20,000 of those cuts happened in November.
We’ve picked out 3 companies that went through some of the most public and sizable layoffs back then to see what happened.
Price 13.01.2022: 331.90 USD
Price 13.01.2023: 136.98 USD
YoY % change: -58.72%
On the 9th of November, Meta’s — the parent company of Facebook, Instagram, and Whatsapp — Chief Exec, Mark Zuckerberg announced that the company was cutting 11,000 jobs — around 13% of its global workforce.
The layoffs were made across departments and regions, with areas like recruiting and business teams affected more than others.
Meta stock, 6 months
As you can see, Meta’s fortunes were in decline over the course of the last 6 months, but the period immediately preceding the chop was the worst.
The company saw 25% of its value wiped out in a single day on the 25th October as investors witnessed a very disappointing revenue outlook. That drop saw Meta slip out of the top 20 largest US companies.
Since the 9th of November, Meta stock has risen 35%. However, that’s done little to change the company’s direction, as it’s been revealed the potential candidates are still seeing job offers rescinded.
There must be few tech companies with a more turbulent 2022 than Twitter. Massive layoffs immediately followed Elon Musk’s purchase of the social media platform, with some sources stating that it was as much as 50% of the company’s employees.
Unfortunately, Elon’s purchase also took the company private, so it’s hard for us to measure the quantitative impact of the layoffs. However, some analysts have commented on the affects.
Drastic cuts to infrastructure spending are expected to have made the platform vulnerable to technical glitches and hacks. Reduced staffing in content moderation teams has also made the company less responsive to post reports.
The biggest impact, of course, might be employee morale. A number of sacked employees publicly stated that leaving the company was actually a blessing in disguise.
Price 13.01.2022: 231.23 USD
Price 13.01.2023: 149.51 USD
YoY % change: -35.45%
This one is still a little raw. Just last week, Salesforce announced that it would be cutting around 8,000 people, about 10% of its workforce.
At the time, Marc Benioff, the company’s co-chief executive, stated: “The environment remains challenging, and our customers are taking a more measured approach to their purchasing decisions.”
Why did this happen? Like many tech companies, Salesforce’s revenue had a boom during the pandemic when people around the world were forced to work remotely and relied more heavily on technology to collaborate with their teams.
This bubble has now burst it seems.
There are also signs that the company simply grew too fast, hiring 32,000 people in just 3 years.
Like Meta, the job cuts has had a seemingly positive affect on stock price, bringing a 9.7% increase since then.
Salesforce, 6 months
Does this mean a Recession is imminent?
Some financial analysts believe layoffs at companies like Meta, Twitter, and Salesforce are proof that the economy is in the early stages of a widely forecast downturn.
According to a report by Goldman Sachs, that’s baloney, largely because these tech companies, while a vital part of the US and global economy, represent a small section of the wider financial market.
Additionally, and most importantly, those laid off workers are not expected to be out of work for long. Most individuals have highly sought after skills and are therefore likely to get another job in tech soon.
So, ultimately, these layoffs, whilst initially terrible for the employees, will generally have a short-term impact on both the stock of each company and the wider economy.
Do you think we’re right? Who do you think will be more impacted by these layoffs? We’d love to know! Tweet us at @_contentworks!
Top fundamental events week commencing 16.01.23
Here are all of the main events coming up in what looks like a pretty busy week for the markets.
No major events are scheduled.
● AUD — Westpac Consumer Confidence Index (JAN)
● GBP — Employment Change (OCT); Unemployment Rate (NOV)
● EUR — German Inflation Rate YoY Final (DEC); ZEW Economic Sentiment Index (JAN)
● CAD — Core Inflation Rate MoM (DEC); Inflation Rate YoY (DEC)
● JPY — BoJ Interest Rate Decision; BoJ Quarterly Outlook Report
● GBP — Core Inflation Rate YoY (DEC); Inflation Rate YoY (DEC)
● USD — PPI MoM (DEC); Retail Sales MoM (DEC)
● AUD — Employment Change (DEC); Unemployment Rate (DEC)
● EUR — ECB Monetary Policy Meeting Accounts
● USD — Building Permits Prel (DEC)
● JPY — Inflation Rate YoY (DEC)
Here at Contentworks we closely follow market movements and prep content that we think your traders would love to read. Let’s get you started right here.
The Contentworks team