- cross-posted to:
- lavoro
- technology@beehaw.org
- cross-posted to:
- lavoro
- technology@beehaw.org
Nearly 25,000 tech workers were laid off in the first weeks of 2024. Why is that?::undefined
Nearly 25,000 tech workers were laid off in the first weeks of 2024. Why is that?::undefined
As others stated a small portion of that was due to over-hiring, some to follow the layoff trend and some to make the earnings call look good.
But from what some experts are saying; there’s also another factor, which is even worse.
There’s a looming threat of a recession hitting in a few months (which is said to be a much bigger recession than the post-Covid one). And this recession will be tied to the Commercial Real-Estate Bubble.
They are saying that it will be like the 2009 Mortgage Crisis and will be very disruptive.
There’s this theory that companies are reducing their headcount to prepare for this recession by reducing their expenses to the minimum. Which makes sense.
For the companies without savings that is a must but the ugly part is that you see big names with huge amounts of money in the bank laying off people as well.
Well, because they don’t want to invest that money on the people, they will use all that money to buy smaller companies when the recession hits. All big tech with enough money in the bank is rooting for the recession to happen so they can buy everything for very cheap and grow even more.
I don’t get how there’s any connection. Sure, it sucks to own commercial real estate, or be one of the service companies that grew up to support office work, but isn’t the whole problem being that tech and other large companies no longer want to pay for that? This should be a bonanza for tech companies, saving billions of dollars that formerly went toward renting office space. Why aren’t we expecting a tech company boom?
The anticipation is not that it’ll hurt the tech companies, but the economy as a whole. A generalized economic slowdown impacts everyone, even if you specifically benefited from it.
If I could tell you exactly how it’ll unfold, I’d be using that to make a lot of money instead. It’s not even certain that it will happen.
Commercial real estate was for a long time a roughly predictable investment, and profitable.
Now profitability is severely reduced because people, including tech companies, are cutting their usage.
If the market collapses, it’s unclear how far down it’ll drag the economy, so companies are bracing for it to be bad.
Hopefully they’re wrong. Commercial real estate should have no direct impact on most tech
It shouldn’t, but there shouldn’t have been a connection between home mortgages and the auto industry either.
It’s not just the connectedness of the industry sectors, but their mutual connection to financial markets.
It won’t.
It will have indirect impact. The question is how much.
If the entire economy is down, people have less disposable income. The big income areas in tech are advertising, goods sales, monthly streaming services, and cloud compute.
Less disposable income = less people buying things they’re advertised, less people buying shit they don’t need off Amazon, less people keeping their Prime, Netflix, YouTube Premium, Spotify, or Disney+ accounts active, and less cloud compute resources needed to drive e-commerce websites.
This is probably going to work out to be a global catastrophe.
https://old.lemmy.world/post/11314307
https://old.lemmy.world/comment/7121127
Do you have any more reading on how a looming recession is will mirror 2008?
There has been a fud, fear mongering, excuse providing ‘looming recession’ every single time things are going kind of ok.
Also inflation fear stokes actual real inflation.
I think there is a bigger chance of people starting to default on their student debts and on their stupid car loans than the commercial real estate alone causing anything.
You can literally just convert office buildings into apartments if you want.
As much as I think commercial real estate is minimally linked to the rest of the economy, it’s been well established that you can’t just convert office buildings to apartments.
Floor plates aren’t cut to manage the changes to the floor plans in some cases not even being designed to carry the weight as modern office buildings often utilize floating plates so adding more walls actually would cause all kinds of issues with the walls as the building wobbles around. The plumbing doesn’t have the capacity and also is centralized in the buildings despite apartments each needing it, requiring more alterations to the floor plate. The windows requirements for bedrooms leaves most of the central space of the building unusable or everyone has kitchens and living rooms with no windows…. It’s often cheaper to demolish the building and start over than it would be to modify it.
To get a real idea of this look at apartment buildings in manhattan. They are either long and skinny towers or they are the size of a block, but have a massive quartyard running down the middle where office buildings are solid all the way through.
Exactly this. If not utilized by companies most of these office buildings will be sunken investment.
There’s a very informational video here detailing the challenges of converting office buildings into residential.
https://youtu.be/FQOgOhheSi4?si=Wciv_kGUWurhmBy-
Here is an alternative Piped link(s):
https://piped.video/FQOgOhheSi4?si=Wciv_kGUWurhmBy-
Piped is a privacy-respecting open-source alternative frontend to YouTube.
I’m open-source; check me out at GitHub.
https://old.lemmy.world/post/11314307
https://old.lemmy.world/comment/7121127
I didn’t mean to say it’s going to be as big as the 2008 crisis but the idea was that it’s gonna create a similar domino effect.
Here are some stuff about this.
https://www.jpmorgan.com/insights/real-estate/commercial-real-estate/commercial-real-estate-trends
https://www2.deloitte.com/ca/en/pages/real-estate/articles/2024-realestate-outlook.html
https://finance.yahoo.com/news/kevin-o-leary-says-coming-230043170.html
https://youtu.be/YLshGvV0lRo?si=yTpYIyGLFFVv4D6i
https://youtu.be/Jq_6RKHJIIA?si=F43pJoeDv9FvUGCw
https://youtu.be/-V9yPGdubHQ?si=hdrxXJ71g3mwVyO2
I’m not an Economist but from what I understand the argument is like this:
1- Covid changed the work culture and made remote work viable
2- This in turn reduced the value of Commercial Real-Estate
3- There’s a lot of investment of Comm. real estate. And investors & owners wanted to keep the value of their assets high.
4- So there was the RTO mandates. Which was initially pushed by the investors.
5- Ukraine war creates inflation and raised interest rates. The time of free money is over.
6- Now investors push for companies to turn profit instead of growth.
7- Companies try to cut costs to please the investors. Mass layoffs happening. Startups going bankrupt.
8- Since the interest rates are still high and investors saw that turning growth into profit wasn’t that easy they are shy to put in money into new investments. Especially IT (AI excluded)
9- Investments dried up which means there’s less growth potential for companies meaning even less demand for Commercial Real-Estate. Which means whoever invested heavily (with loans) into comm. Real-Estate will go under when it’s time to pay back.
10- The banks who are heavily invested in Comm. Real-Estate will get affected meaning there will be even less money for investment causing an economic recession.
I think another thing that isn’t being talked about with these layoffs, which would call for more unionization and policy making, is that “AI” is taking over these jobs.
Also when companies merge, there are “redundant” employees. So like the recent Microsoft layoffs, those were going to happen.
Surely. AI is definitely a factor. But at the same time it’s a fad right now. It’s what Blockchain was a few years ago. Everyone is trying to jump into the AI bandwagon as it’s the new cool hip thing. Sadly unlike Blockchain this is getting people fired instead of getting hired.
Even though AI creates remarkable results I don’t think it’s as mature enough as companies really think it’s to be. They are kinda gambling on that it will be able to cover the human work force before the effects of layoffs are felt by the customers.
On that account I think the number one issue is about the cost, uninformed companies think that what they are paying today is the real cost of AI. But in reality all AI offerings are actually burning money to lure customers, to make them get rid of their workforce to get them really dependent on their AI. And when they achieve enough dependency the prices will increase, then the companies will see the real cost of AI. Basically the exact same thing that happened with Streaming Services.
Another downside that people will notice after great adoption of AI may be that the variations of the results will start to look the same. If all of us use the same AI tool, giving similar prompts for our Ad campaign then most likely our Ad campaigns will look very similar, beating the most important necessity of an Ad campaign; recognition. To beat that AI should be used as a tool by capable people to ease their job and not to do their entire job.
I think it will take a few years for companies to really realize that.
I feel like something big is coming soon too. My guess is a recession like that, but i don’t know the economy enough to know. But somehow, someway, all the corporate places are firing and all the grocery stores are adding security layers in my country (expecting more thefts due to a down trend of money?).
Just feels like somethings off and all the rich companies with economic analysis teams are already putting in their action plans.