
Layoffs Are Coming - craigkerstiens
https://jacobian.org/2020/mar/13/layoffs-are-coming/
======
rolleiflex
> It’s looking increasingly likely that the COVID-19 pandemic will cause a
> recession. I’m neither an epidemiologist nor an economist

Financial markets have stability issues when the situation is calm in the
short term, but it’s unknown what’s going to happen six months from now. The
situation is reversed today, we’re all going through some bad mess due to our
states being unprepared for this, but it’s mid to high chance this will have
settled one way or another in six months.

What we had last week was a shock that came not from the financial system
itself but from public health. We might have to adjust our lives to this and
that might have financial implications, but there’s nothing fundamentally
different in terms of financial markets between the week before and the last
week.

Recessions or down cycles are normal, and that might happen - and that is
finances just charting the rest of the world at large. But the 2008 crisis was
a result of something going haywire in the financial system itself, which is
something that is more prone to create much bigger shocks than external
events. We might have a mild recession, yes. But it’s unlikely it’s going to
be like 2008, since this crisis is fundamentally external.

~~~
elliekelly
> but there’s nothing fundamentally different in terms of finances between the
> week before and the last week

This is not true for many households. People with young schoolchildren, people
who work for tips or in the service industry, people who can't work remotely
but are forced to stay home. There are many people whose finances have
fundamentally changed in the last week.

~~~
rolleiflex
Apologies, I meant ‘financial markets’, not personal finances. I’m correcting
it now. (Not a native English speaker, sorry)

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Avalaxy
This timing is really unfortunate. I work as a freelance software engineer and
my assignment ended a month ago. I've been looking for a new assignment, but
it looks like nobody is hiring right now. I'm preparing for burning through
all my saving because I don't see it change easily in the next months :(

~~~
TeMPOraL
Same here. I was about to start a new job abroad two weeks from now, but now
my country's borders are locked and I can't fly out (not that I'd want to if I
could, in this situation). I'm hoping I can renegotiate for remote, but if
that fails, I'll be burning through savings too.

~~~
dorchadas
I'm kinda feeling this too. I've been accepted into a masters in quantitative
finance abroad, and was looking forward to starting in September. Now, not so
sure what's going to happen, especially if we're heading into recession and
other issues...

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vsareto
I'd like to warn everyone to not quit, even if you have deep savings or think
a layoff is coming. Do reasonable things to stay, where reasonable depends on
your support network and savings.

Even 2-3 extra months is significant cash for most of you. Not having a job
during a recession is scary (even to me with no kids, no spouse, no
dependents). Tech might be better off in some respects, but it also means it
will be much harder to get a job in an emergency as those will be filled by
many others.

------
DocG
I am not sure if I'm lucky or unlucky - I recently, meaning 15 days ago quit
my job. It was a decision prepared well in advance.

I'm glad because I am mentally prepared to not work for quite a while with
okayish amount of savings. I'm sad because this means all my own business
plans, that I prepared my savings for, are on hold.

Im still not sure is it better to go through resection with no work but with
savings or just work through it.

~~~
H8crilA
I think it's much better to enter a recession while employed. For starters:
not everyone is fired, obviously. If you're not fired then you can just keep
going on as usual. It's not easy to find a job in a contracting economy.

------
ajross
FWIW: corporate layoffs are going to lag somewhat. For PR reasons, no one
wants to be seen as dumping folks during a crisis. And for accounting reasons,
the need to balance the sheets generally lags by a quarter (that is, virtually
no employer is "agile" with its layoffs).

The more immediate job losses are in the service sector, and that is happening
_already_.

~~~
phpnode
airlines are already dumping staff, and that's the tip of the iceberg.

~~~
greenyoda
Also, probably, other travel-related businesses, such as the hotel industry.

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nkozyra
What other result could come from the _global economy_ basically crawling to a
halt for - best case scenario - a month or two?

Not to be glib but I think most people understand this.

~~~
umvi
Sometimes I wonder if the harm reduced by "flattening the curve" is greater
than the harm introduced by flattening the global economy...

~~~
asveikau
Is that to say it's better to be dead than unemployed?

Not meaning to be glib nor overly dramatic. But I thought the whole point is
that flattening the curve eases load on hospitals meaning they turn away fewer
people, and thus more of them survive. So the question you are asking is: how
much is preventable loss of life worth?

~~~
hervature
There have been studies showing that unemployment directly increases mortality
here is just one [0].

[0] -
[https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1448606/](https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1448606/)

~~~
asveikau
That's interesting, sad, and makes intuitive sense.

But I'm not sure we can take it back and say "we need to allow more people to
die from coronavirus so that fewer die from unemployment". Ideally we would
want to minimize both.

~~~
nitrogen
One day when we have the benefit of hindsight someone will do an analysis on
the quality-adjusted life years gained and lost by the different responses to
this.

------
mntmoss
Note that this one is not a crash imposed by market forces overextending
themselves(the usual dynamic of recession), so much as a reset button suddenly
pushed. An economy under quarantine is not just a depressed economy, it's a
_different_ economy, as demonstrated by the abrupt mass adoption of WFH and
sudden political will for sick leave. The game took a time-out and the rules
changed. When we resume business as usual, it won't move the clock backwards.

So there is a silver lining in that opportunities going forward will change,
but that still means "no opportunities" in the near term while everyone sorts
out what to make of it.

------
mydpy
If anything, I think tech is protected from the effects of the coming
recession. Our industry is one of the best poised to maintain business as
usual. That said, the impact of the economic effects is coming.

~~~
H8crilA
Are you kidding me? Tech is so ridiculously inflated, just look at how many
stupid "tech" startups were created recently. This will deleverage now. Not
even the "big guys" are so super safe - a lot of VC money is recycled back
into "tech" via AWS bills and online ads.

The only worse business right now is probably oil, especially fracking. Those
guys are doomed.

~~~
rvz
Depends on which "big guys" you are on about. Likely, it's those who have
recently IPO'd on VC money and depend on lots of moving parts and huge costs
like cloud costs, logistics, travel and are also in specific domains which are
waiting to be sherlocked by a FAAMNG company. The best of all:

It is those "tech" startups who generate little revenue and no profit, but
take in VC money into their series D,E,F and G+ for years.

Ultimately, it comes to no surprise that layoffs from such startups would
happen at this time since my so called "machine learning crystal ball"
predicted this [0] anyway whilst ignoring other earlier vacuous predictions.
FAAMNG and other profitable companies will survive this.

[0]
[https://news.ycombinator.com/item?id=21926473](https://news.ycombinator.com/item?id=21926473)

~~~
H8crilA
When I wrote "big guys" I meant Apple, Microsoft, Facebook, Google, Amazon.
And I meant even those aren't safe due to the reasons mentioned in the GP,
despite large cash buffers and generally excellent credit.

Many (most?) companies will survive, the question is in what form.

~~~
rvz
Correct. No-one's completely safe. But those companies you mention that are
made up of the FAAMNG including Netflix are powering the majority of the
internet services such as (AWS, GCP, Azure, Facebook Ads and Apple Services)
which are used by many developers and startups. For some of them, this isn't
even their main source of revenue generation.

It's the unsustainable VC funded, near-zero revenue, rapid growth and high
costs burn rate so called 'tech' startups which some have IPO'd or some are
still raising capital with no plan for a profit that will not survive.

------
rdegges
Another important thing to consider: reduce liabilities ASAP. I'm writing an
article on this currently, but I see way too many friends and co-workers who
have over-leveraged themselves: large mortgages, car loans, student loans,
etc.

In good times it is a good idea to reduce leverage (pay down your debts) so
you have less monthly burn.

If you are in a highly leveraged position right now, here's my advice: get a 6
month (or 1 year) emergency fund in place ASAP, pay off any debt using the
debt snowball method (smallest debts first) to free up cash flow, and DON'T
TAKE ON ANY MORE LOANS!

The difference between having a monthly burn rate of 3k (with no debt) and 8k
(with debt) is massive and will dramatically impact your life: anxiety,
stress, emergency fund, etc.

Now's the time to derisk yourself as much as possible.

~~~
tistoon
I am in the process of buying a condo apartment (Canada) (each year real
estate was usually a 6% increase in value).

I sent the signed approval friday, but they refused it because my PDF was sign
electronically. I was about to re-send it Monday..

What is your opinion?

Thank you!

~~~
Hydraulix989
Real estate in NYC is already dipping 30%, you could have definitely timed
this one a bit better, but if you are in it for the long-haul, then you’re
fine.

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sys_64738
This won't be any regular lay off. Bars and restaurants are all shutting.
Retail stores can't stay open. 60% of the workforce may be out of work in 3
months time. This might be an economic collapse.

~~~
H8crilA
Let's not overreact either. A sensible thing to do is to issue an executive
order that protects employment during this time, freezes all kinds of credit
payments, freezes rent payments. Perhaps the Treasury should guarantee
payrolls, too.

~~~
sys_64738
You can do the maths: 19m work in retail 13m work in restaurants

Add in the logistics businesses to support all these.

~~~
H8crilA
My point is this is most likely temporary (on the order of weeks). Guarantee
people's financial/employment safety (the measures I've listed), keep them in
their homes, back to business when this blows over. This is exactly the kind
of stuff governments are supposed to do.

~~~
sys_64738
But is it just "weeks". We've no evidence nor precedent to know how long this
lock down will last. The problem being that without any vaccine (and mass
generation of vaccine and distribution to the population), the virus will
continue spreading when those "weeks" are up.

~~~
H8crilA
That's a whole other scenario which will have bigger consequences than just a
recession.

------
alexandercrohde
Linkbait.

Offers no evidence. I see no reason why the vast majority of software
companies would be affected at all by this (Github, google, amazon, etc).

I especially foresee this being a huge benefit to biotech.

~~~
sibeliuss
Uh, sorry to break it to you, but Github, Google and Amazon are not the vast
majority of software companies.

~~~
alexandercrohde
The burden isn't on me to list every company that won't be affected by this.
The burden is on the person making claim to provide evidence for their claim.

------
bitforger
Anyone in academia have takes on the potential effects on graduate students
(PhDs / post-docs)? What happens if a lab loses funding?

~~~
cozzyd
Government funding for research should be largely unaffected. Also most grants
are long-term. On the other hand, fewer people will probably go into industry
in the near-term which leads to more competition for grad school / postdocs.

------
76543210
Ancedote time.

My job was ending due to bad sales, my next job is on hold until people return
to work.

Our daycare said they are charging us money but we can't come (they said this
week only... But this is after we complained).

The only business but really affected? My wife's company who treats people 1
on 1. But who knows even that might be slowed down from paranoid customers.

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mkchoi212
I feel like in the domain of Software companies, this only applies to very
traditional, conservative companies. Most startups and “liberal” companies
will be fine having their employees WFH. In a month or so, they could even be
pleasantly surprised about how worker productivity went up due to the benefits
of WFH.

~~~
almost_usual
How are they fine if they don’t have customers anymore?

~~~
mkchoi212
Of course the number of customers will wane. However, the economy is not
something that can easily be halted. For example, businesses really on other
businesses to function. This means that B2B products won’t be as severely
impacted when compared to the local cafe.

------
dgudkov
For a recession to start something fundamental has to change _irreversibly_.
E.g. cornerstone companies implode. A class of securities evaporates.

What does the virus pandemic change irreversibly?

~~~
greenyoda
> For a recession to start something fundamental has to change irreversibly.

It seems like you're thinking of the last recession (2008), which included the
collapse of major financial firms like Lehman. But most recessions are much
less catastrophic. A recession just means a slowdown in the economy, usually
defined as "two consecutive quarters of negative GDP growth".[1]

[1]
[https://en.wikipedia.org/wiki/Recession#Definition](https://en.wikipedia.org/wiki/Recession#Definition)

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shams93
I just got laid off but there is a lot of defacto legalization of
discrimination. Anyone who isn't in the majority like women and people of
color are going to be hit extremely hard in this new round of layoffs that
began last week. For those who remain you'll be asked to do "shared sacrifice"
and either take pay cuts do even more unpaid overtime or both.

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whb07
This.... is not what’s going to happen. Much less for a skilled worker in this
forum.

Glad to know this fella is a dev and not an Econ quack.

~~~
xxpor
I misread the URL and thought this was for jacobin, and not jacobi _a_ n

