Transcript:
Easan Arulanantham:
Why are some companies reporting really great quarters, but turning around and laying off staff like Tesla Tesla doubled their earnings from the previous year, and they also recorded record profits, yet they’re trying to trim some of their staff right now.
Tom Vaughan:
Companies, generally speaking, the employment numbers, the layoffs, and those are lagging indicators. I mean, literally, sometimes the peak layoff is at the bottom of the market, bottom of the economy, and the economy is already turning around, and companies are still laying people off. And so this is obviously not that what this is, is a scenario where companies are looking forward on a projection basis, they’re seeing certain signs that things could slow down, either either directly in their own business where they’re seeing some orders or different things happening, or they’re seeing signs economically, I mean, they’re leading economic indicators down from a tie. The overall, you know, inverted yield curve between the 10. And the two year Treasury is inverted, the three to 10, three months and tenure almost went inverted. So these are signals that things might be slowing down. And so if I’m Tesla, for example, I’m trying to make my earnings. And when I get to that quarterly report, those are super important. I don’t want the stock to drop a bunch, because I can’t, one of the big costs can be labor. And so I’m I might be trying to, you know, reduce force, usually what happens first is they cut back on their hiring, they’re hiring for some future growth expectations. And that was certainly happening, right? I mean, they were hiring is 11 point something million jobs open. Everybody was seeing future growth needed people. And that’s starting to reverse now.
And we are seeing some, you know, reduction in job openings. And then secondly, now, even some layoffs that are happening. So I think these companies are looking forward, and they’re seeing things slow down, doesn’t mean they’re right. I mean, it’s not any different than anybody else in the market. You know, nobody knows for sure. What’s happening. Now, I would say in the case of Tesla, they probably know their own business really well. And I’d be a little bit wondering what’s happening there, you know, are they seeing some slowdowns? They’ve had some supply chain issues, because of what happened in China different things. So, you know, it’s hard to tell what they’re doing. But I will guarantee you they’re trying to make their numbers. And so that’s a big piece of what’s going on here, too. But it’s it’s, it’s a good question, because you’re right. I mean, they literally had record earnings, record sales, delivery vehicles, doing fantastic. And at the same time, they were laying people off. I do think some companies use these layoffs as an excuse to kind of trim out the people they don’t really want. You know, when things are super tight in the labor market, you keep those people because you desperately need, everybody can get things softened up a little bit, you reduce reduce force by 5% or something, you’re gonna get rid of the people that you know, aren’t as productive as the others, right? I mean, it’s just a way to kind of so layoffs are kind of interesting that way.
Easan Arulanantham:
So that’s kind of like going on a slight diet, you know, we over ate during the pandemic, just to try and keep up in a sense. So now we’re just kind of, you know, going five to 10% You know, little cut there.
Tom Vaughan:
That sounds about right. I sat around too much during the pandemic. It was kind of crazy. So yeah, that was good analogy.