[irjustin]

Possibly stupid question - why are so many companies laying off?

According to Wallstreet, the majority of the recession scare isn't a scare. Inflation, while not fully at target, is getting better. Unemployment is at an all time low.

So many companies are laying off like it's the worst times ahead. Obviously layoffs aren't taken lightly so there must be some internal signals that really push them to take these measures.

It just seems like Feds+WallStreet vs companies actions are at odds with each other?

[frfl]

If you read the layoff threads from the last 24 hours a few common reasons are theorized

- Investors pressuring for profits, cut costs (too many people hired during Covid, total salary bill too big to justify right now). One company does it, other companies may be pressured to drive up stock prices

- Money is expensive, <1% interest rates vs 5%+ now, investors can easily get 5%, so high growth (no profit) companies aren't attractive investment targets, price falls, see previous point

- Section 174 possibly, companies can't write off entire salaries for engineers as easily to offset revenue, corporate tax bill increases. It was apparently an unexpected (people didn't expect it to pass) tax bill from 2017 that came into effect in 2022(or 23, idk)

- The sudden increase in layoffs this week could be due to a backlog over past month+ as a layoff in January looks less bad vs a layoff in December (holidays)

- Companies following the lead of other companies (CEOs not thinking for themselves, just looking at what others are doing) -- I don't think this holds, previous points make more sense

Most companies never state real motive, besides (now considered meme responses on HN?) like "we/I take full responsibility", overly generic "we over hired", or "due to (macro)economic conditions". So as far as I've seen it's mainly people guessing at the reasons.

[two_in_one]

> Companies following the lead of other companies (CEOs not thinking for themselves, just looking at what others are doing)

Layoff usually negatively affects company's image. It makes sense to do it when everybody's attention is on someone else. Then it looks like nothing special.

[yreg]

I agree, but how do they know about each other? Do the people deciding on layoffs in all these companies talk to each other and coordinate? Sounds hard to believe the news wouldn't leak.

[cortesoft]

Yep. If lots of companies are laying people off, you can pass it off as macroeconomic pressures instead of issues with your own company.

[joecool1029]

I wonder if antitrust litigation/regulation has some effect here as well? Axe divisions/workers on things that could appear to abuse market position.

[frfl]

Haven't come across this theory, but sure, it's a theory.

[DeepYogurt]

Cuts seem to be broad based so I would think not

[squokko]

A lot of boards want to lay people off to increase profits, but they're afraid that if they do it, the company will seem like it's failing, causing high performing employees to leave and perhaps even customers to get worried.

But once there seems to be a moment where others are laying off, they can ostensibly claim to be doing a layoff because of broad economic conditions rather than because their company is mismanaged. This means that once a layoff wave gets going, it snowballs memetically.

Of course, if it becomes big enough, it can snowball due to non-memetic reasons (laid off employees have less money, spend less, and cause economic contraction). An example would be BigCo lays off 10,000 people, which ends their Slack subscriptions, which causes Slack to lose money, which causes Slack to lay off people, which reduces their employees' spending on yoga classes, which causes yoga studios to layoff, etc.

[sputknick]

When it comes to layoffs, no one wants to be the first company to do it, and no one wants to be the last company to do it. Once a few of the industry leaders started doing it, it gave others top-cover to start the process. At this point they need to do the layoffs so if they report bad sales numbers for the quarter they can say "we saw this coming, thats why we did some layoffs alredy. we should be good now". And if it turns out the didn't "need" to do it, they can just hire the people other companies laid off.

[rdtsc]

This is how I see it as well. Many might have wanted to do it, but they didn't want to be the first. As soon as the big ones started doing, even just one or two, the floodgates opened and now everyone can blame it on "everyone else doing it", "it's the environment", "the economic reality", etc.

[eep_social]

My feeling is that the proximate cause is a correction of the outsized growth in 2020-21. The industry collectively overshot so far that they can’t just slow hiring but actually have to lay off.

In my bigcorp I observe a pivot toward a sustainable pace of growth and significantly tighter scrutiny on costs and efficiency despite working in a growing area of the business.

[strich]

I have no credentials to provide an informed opinion, but in my industry of gamedev where layoffs are currently widespread and massive, the consensus seems to be that the past 3 years saw unprecedented hiring growth due to covid etc and it has caused an otherwise "normal" consolidation cycle to be way larger. For me I think it rings true - I don't think some dark storm is coming it's just the tide going back out after a big spending spree.

[whstl]

I'm also interested in the responses to your questions, but I would ask something else: are non-tech companies also doing layoffs? I'm not in the US so I'm not really up to date to that.

[tlogan]

The layoffs are widespread. For example, Dominos just laid off 1,200 drivers.

However discussions about the economy's health become particularly politicaly charged during an election year. So any conversation about the state of the economy, whether it's perceived as good or bad, inevitably carries political implications in this context.

Edit: it is not Dominos it is Pizza Hut https://www.sfgate.com/food/article/pizza-hut-drivers-layoff...

[neom]

2024: A year of political turmoil and economic uncertainty:

https://www.allianz.com/en/press/news/studies/231215-allianz...

Very interesting read.

[whatyesaid]

In that link it says they are required to pay all restaurant workers $20 an hour due to new laws. From my understanding that job gets a lot of tips in America so they don't want to cough up $20 an hour.

the idea of having in-house delivery people for any place is outdated compared to gig apps probably. You only lose a bit of money by not having your own people.

[cafard]

My experience as a pizza-delivery guy is about 50 years out of date, but tips were few and small.

[ipqk]

Are you talking about California based Pizza Huts? If so, they're replacing them with gig workers instead.

[spydum]

labor-dependent enterprises are being whispered unbelievably outrageous things from your regular biz consultants (Bain, pwc, ey, etc) about how much money that could save in labor via AI, so some may be cutting heads to fund their AI transformations? I'm not sure that's entirely it though. Many execs have been warning staff of corp austerity measures for a while to bring costs in line. It does boggle the mind though, as many of these same companies are all hitting record revenues (due to inflation).

[porknubbins]

My impression is that the tech layoffs are entirely related to Covid overhiring, VC money drying up with high interest rates, greed and wanting to get share prices up, and finally removing useless departments like Elon did with twitter.

I am not seeing any similar layoffs in other industries, some may be slowing down but mine seems normal.

[mef]

high interest rates increase cost to service debt

[ojbyrne]

Most big tech companies don’t have debt.

[mef]

Cloudflare does!