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What's going on with all these job cuts all concentrated now? The market is expecting the Fed to start cutting interest rates[0] in March and that has been bull
by raziel2701 3y ago
What's going on with all these job cuts all concentrated now? The market is expecting the Fed to start cutting interest rates[0] in March and that has been bullish for the latter half of last year in the stock market. So why are so many companies cutting people? Are the March rate cuts too little too late or do they see that some damage has already been done and they're front running that? Or is it that layoffs is the only way they see to maintain their growth expectations set by wall street and thus it's a financial engineering move?
[0] https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html https://www.cmegroup.com/markets/interest-rates/cme-fedwatch...
- rgbrenner 3y agoThis is everyone's last chance to trim their roles before the rate cuts. Once the rate cuts occur, the bull market will return, and companies doing layoffs (sending the message they are not experiencing growth) will be punished by the market.
- preommr 3y ago> bull market will return Return? It's been 'line only ever goes up' since November.
- rgbrenner 3y agoExpectation of a bull market. Right now companies arent being penalized for layoffs because there's some uneasiness about the impact of the feds actions. A lot of people expected a recession from pushing interest rates this high, but it hasn't happened. Once it's clear that there will be no recession from the fed's actions (ie: when rates drop), CEOs will be fully responsible for their company's poor performance in the eyes of the market.
- deleted 3y ago[deleted]
- panphora 3y ago> Once the rate cuts occur, the bull market will return Rate cuts often signal an impending recession, not a bull market, as historical data shows. The Federal Funds Effective Rate chart illustrates how recessions (marked in gray) align with periods of rate reductions. https://fred.stlouisfed.org/series/FEDFUNDS https://fred.stlouisfed.org/series/FEDFUNDS
- marcosdumay 3y ago> impending recession Hum... That graph shows recessions being a signal of impeding cuts and really not the other way around.
- ChadMoran 3y agoI wonder if its people noticing that maybe they over hired and now is a better time than ever to fix that. I've seen lots of people use Twitter as a gut-check case study.
- conjecTech 3y agoNoone wants to cut during the holidays. I'm guessing most of these were decided months ago. You're just seeing them happen as people get back into the office.
- tootie 3y agoFor one, this is not an announcement of 20K layoffs. It's an announcement of planned reduction in headcount as of 2026. Also, it's global workforce, not US. Also, go look at the BLS JOLTS data. Job separations happen by the millions every month even when we see net job growth. Seeing headlines about job losses at a particular company are only news as it pertains to that company. It doesn't imply a national or global trend. https://www.bls.gov/news.release/jolts.htm https://www.bls.gov/news.release/jolts.htm Nov 2023 saw 1.5M involuntary separations (ie layoffs) in a month that saw a net of 200K new jobs.
- JackFr 3y agoAlso note that 20K jobs is 6-7% of Citi’s workforce.
- spaceman_2020 3y agoRate cuts are not a given with the hotter CPI print this month
- lamontcg 3y agoThe Fed's suggestion of 3 rate cuts down to 4.5% are still quite high compared to the period of a decade of essentially ZIRP that preceded it. The futures market expectation of 6 rate cuts is likely equivalent to a bet that there will be a recession by the year's end. Either way you have "end-of-cheap-money" conditions or "recession" conditions and so the ZIRP-fueled hiring boom needs to get reversed. Honestly I don't think there's much of a distinction and that the end-of-cheap-money leads to these kinds of layoffs which will eventually trigger a recession, combined with vulnerable sectors of the economy (commercial real estate, private equity) popping. For all the fanfare that we've managed to hit a soft landing, the historically based fed-cycle recession predictions were always that a recession typically comes 6-12 months after the Fed STOPS hiking rates -- which means this July.
- politician 3y ago>> The market is expecting the Fed to start cutting interest rates... However: > Just about every time the Fed started CUTTING rates dating back to 1950, the unemployment rate has spiked. [1] pic.twitter.com/DChSRJJdD7
- disgruntledphd2 3y agoYeah, because the Fed have a dual mandate so when employment decreases, they loosen financial conditions.
- politician 3y agoThe "dual mandate" was established by the Federal Reserve Reform Act of 1977, whereas the data shows this phenomenon goes back over 20 years earlier. How then could the dual mandate be the cause of the effect?
- nostrademons 3y agoThey had an informal dual mandate to maximize employment and minimize inflation before then, but the purpose of the Federal Reserve as created was to preserve financial stability, avoid financial panics, and maximize employment. In other words, they had half of the dual mandate, the half that involved injecting money when times were bad to stabilize the system. The government codified the inflation mandate in response to the 1970s inflation. The phenomena of dropping rates when a recession is impending is congruent with the "maximize employment" portion of their mandate, which predated 1977. Indeed, their failure to do this in 1929-1930 led to the Great Depression. Ben Bernanke's pre-Fed-chair academic career was devoted to studying that.
- mullingitover 3y agoI think this is a “skate where the puck is going” situation. The fed sees things trending toward recession before it arrives and starts cutting, but the recession happens before the rate cuts have any effects on employment.
- faluzure 3y agoThe March rate cuts are not guaranteed. The markets can stay irrational longer than you (the companies in question) can remain solvent.
- wnevets 3y ago> What's going on with all these job cuts all concentrated now? This is how I am imagine it went down. > Excuse me, sir. The council is worried about the economy heating up. They wondered if it'd be possible to fire 500000. Maybe from one of the smaller companies where no one would notice, like one of the cab companies. > Fire one million.
- mtremsal 3y agoIs this… from the Fifth Element?
- toomuchtodo 3y agohttps://youtu.be/r0mO6UY6uTg https://youtu.be/r0mO6UY6uTg
- NoboruWataya 3y agoCiti has been pretty dysfunctional, and job cuts were coming, for a long time. I know there have been a lot of tech layoffs announced lately and maybe there is something behind those but I wouldn't assume this announcement has the same cause. Fraser (the CEO) has been talking a big game for months about taking drastic action to turn Citi around. Sooner or later she had to actually do something or else her own position would start to look very vulnerable.
- deleted 3y ago[deleted]
- asciimov 3y agoNew year and quarter for businesses, gotta show you made more money by spending less on salaries. They can fire now and still be covered by "the market made us do it". Fire now, and rehire for less in the next quarter or two. The US needs better protection for workers. If a corp has to fire 20k, that is a leadership problem and they should go too.
- raydev 3y agoAt this point, we are in full bandwagon/meme territory, aside from the few companies that actually do need to fix their cashflow. Now that the stock market will probably immediately reward you if you just recite the mantra "we overhired, COVID, etc", it's just the latest way to juice your stock price. There's enough padding when you have thousands of employees that your products won't suffer too much, and it gives you an excuse to reorg and perhaps find more efficiencies in the process. In theory, I can see the draw of "a reset will make us faster". Of course, new efficiencies aren't guaranteed and the company's output may stay the same or shrink in the future, but at least the shareholders got more money. Layoffs in December can potentially be bad press, so what we're seeing now is the execution of the 2023 plan to Big Reset before the market judges this type of move as a bad look again. Everyone else is juicing their stock prices this way, why shouldn't we?
- JackFr 3y ago1) Citi has been talking about these cuts for three months. There’s little new here other than the CEO specifying the target head count. 2) There is no intent to rehire. Whole business lines are being shuttered. 3) Yes, of course there is a huge management problem. They fired 300 managing directors in November. Since 2000 Citi stock is down more than 90%. JPMC and BofA generate an order of magnitude more revenue per employee than Citi. Jane Fraser is just the latest in a long series of executives seemingly unable to tame the beast.
- wolverine876 3y agoI don't recall something like it ever happening, except perhaps when there was an economic event (like in 2008). It's either a big coincidence, or there is a common outside cause, or it's coordinated.
- nostrademons 3y agoIt's January. This is when annual budgets are set. Layoffs are a natural consequence of "the budget for this year is smaller than last year". Hell, even if the budget is the same size, it'll result in layoffs if anyone got promoted, anyone got cost-of-living raises, etc. A 4% cost-of-living adjustment for everyone results in a ~4% layoff if annual budgets remain constant. Also, the market is predicting rate cuts in March. There is always the chance of the market being wrong, and several prominent institutions (notably Goldman Sachs and JP Morgan Chase) have said they believe this is overly optimistic and it's unclear if we're even done with rate hikes, let alone rate cuts. The Fed statements themselves do not come anywhere close to what the market is predicting - the dot plot (which has trended overoptimistic for the last 3 years) predicts 3 rate cuts, while the market predicts 7.
- octobus2021 3y agoAlso, effect of rising interest rates takes time to propagate. When mortgage rates skyrocket, mortgage originators can still go on for a few months even though they're not making any sales, as nobody's buying real estate. After a few months it becomes clear that sellers are not willing to decrease their prices and Fed is not going to cut rates any time soon, the game's over and they have to cut staff or even go out of business. Startups can continue to operate for a few months burning through their reserves even though nobody's investing in them until they... can't. When the price of bonds that banks have on their assets plunges due to increase in interest rates (they are "marked to market"). Depending on their regulatory requirements it can take a quarter or two. As a result the ratio of the assets of the banks in relation to their liabilities decreases. That's what caused SV bank to collapse (they had less money than they had liabilities and had to fold due to the bank run). In the case of citibank they had to put $1.7 bln into the government deposit insurance fund, which is likely related to the same phenomenon. Interestingly enough, they also reported that a big part of their one-time expenses ($3.8 bln total) included reorganization expenses, e.g. all the severance they had to pay to the people they laid off in 2023 and other costs related to cutting those people. Even more interesting, they expect the expense related to cutting 20,000 people to be between $700,000 and $1 billion. All things considered, Citibank doesn't strike me as a particularly well run organization, and low-level employees are paying the price. As per usual.