Flexport slashes 20% of global workforce over weak 2023 volume forecast

https://theloadstar.com/flexport-slashes-20-of-global-workforce-over-weak-2023-volume-forecast/

by drone • 4 years ago

192 240 4 years ago

msoad• 4 years ago

I don't know what Flexport is, all I know is that it was the only jobs ad in Hacker News for a long time

mattigames• 4 years ago

At some point I wondered if flexport had bought hacker news or something like that to be seeing their ads so frequently.

jacquesm• 4 years ago

No, Pachyderm bought HN.

dilyevsky2• 4 years ago

As yc company I believe you get certain number of these posts for free. I think they were just one of the very few who was still using them

alismayilov• 4 years ago

Same here. When I saw the company name, I remember that I was seeing job ads from this company on HN for a long time.

amalgamated_inc• 4 years ago

I think it's that guy typesfast?

ProAm3• 4 years ago

This is the guy that got famous during the pandemic for suggesting ports stack containers 3 or 4 levels high vs the standard of 2 [1] [2] Turns out 2 is just fine.

[G] https://www.npr.org/2021/11/03/1051773672/a-look-at-whats-ca...

[H] https://news.ycombinator.com/item?id=28957379

nickff• 4 years ago

Where did you get the impression that two is fine? I am somewhat familiar with the issue, and looked at both of your links, but still don't understand. Where I live, they stack containers six high.

baumy2• 4 years ago

I have a message from them in my linkedin inbox from January 3rd (8 days ago) telling me about exciting opportunities there.

You’d be joining at an exciting time, Flexport is in a hyper-growth stage

bityard• 4 years ago

Can you imagine the backlash they would get from both inside and outside the company if they started pulling job recs before publicly announcing the downsizing?

See also: insider trading

akavi3• 4 years ago

YC-funded freight forwarding company. Basic thesis is by using tech, you can dramatically lower the labor costs of forwarding, and since freight forwarding has huge returns to scale, the benefits compound. They raised 2 G$ from 2019-2022, and their CEO used that warchest to expand counter-cyclically through the pandemic. TBD if either of the two theses pan out.

Freight forwarding itself is the industry of coordinating the logistics of freight shipment, ie subcontracting with physical movers of goods (ocean carriers/railroads/trucking companies) and dealing with customs/legal requirements involved in the movement of goods

(Disclaimer: former FP employee and current shareholder)

iab• 4 years ago

They raised two gillion??

bambax2• 4 years ago

Basic thesis is by using tech, you can dramatically lower the labor costs of forwarding, and since freight forwarding has huge returns to scale, the benefits compound

Is this remotely true though? Aren't the main costs of forwarding simply fuel?

At some point I was importing goods from China (really small volume though) and I did ask them for a quote, and they were twice the price what the Chinese factory could get me from their own forwarder.

moneywoes• 4 years ago

Is there room for more innovation in the space, thoughts?

Patrol8394• 4 years ago

Totally! I was literally spammed by FP recruiters .. hyper growth, hyper growth ... and now you see it ... give me a break!

2OEH8eoCRo0• 4 years ago

Why do so many startups use this stupid language? It sounds like a crypto scam.

Quick! Don't think! Get in on the ground floor so you won't be left behind when we go to the moon and you can become a bazillionaire!

abawany• 4 years ago

I've come to the conclusion that such come-hithers in these times are to get easy fodder for the next 'layoff' to save the existing team members.

jasode• 4 years ago

I don't know what Flexport is

Don't know the exact origin of the name but maybe an easy way to remember it is "FLEXible transPORT".

To massively oversimplify it for the sake of being short:

- ship a small package within the same country --> UPS/FedEx

- ship a large heavy package (e.g. forklift pallet) within the same country --> freight trucking company

- send a shipping container from one country to another that requires a ton of complicated government paperwork for export & import, pass customs inspection, pay duty fees, and involves coordinating ocean carriers, railroads, air freight, docks, etc --> a freight forwarding logistics service like FlexPort.

E.g. you invented a new electric scooter and had a factory in China manufacture a thousand of them. Now you have to ship those 1000 scooters from the factory to a warehouse in USA. That's the business FlexPort is in. FlexPort itself doesn't own any ships or railroads. It is a coordinator (acts as agent) for various transport companies.

72f988bf2• 4 years ago

The original source seems to be posted at https://www.flexport.com/blog/flexport-co-ceos-note-to-emplo...

CityOfThrowaway• 4 years ago

Interesting that they say:

At Flexport, 2023 is going to bring extraordinary velocity – we are in the process of doubling our software engineering talent and moving to single threaded business organizations to build world class products faster, and we will continue to invest in delivering best-in-class operational execution for our customers.

Looks like they are laying off non-tech workers who they have made (or will make) obsolete through automation

globalise83• 4 years ago

moving to single threaded business organizations

What does that even mean? They are only able to do one thing at a time? Doesn't sound like a recipe for business success to me...

whiplash451• 4 years ago

You don't layoff workers that you replace through automation. You simply don't renew their contract. It's much smoother and cheaper, and automation does not happen overnight anyways.

umeshunni3• 4 years ago

Flexport Co-CEOs Dave Clark and Ryan Petersen

They could start by laying off 50% of their CEOs

cj• 4 years ago

This article quotes the letter sent to employees, which is published here:

https://www.flexport.com/blog/flexport-co-ceos-note-to-emplo...

sremani• 4 years ago

> It is also hiring some 350 to 400 engineering and software staff, as it focuses on efficiency and technology.

Is it safe to say the Global Trade is down but there is still demand (for now) for tech efficiencies.

game_the0ry• 4 years ago

So far, it is still a good time to be a software engineer.

pm903• 4 years ago

This is really surprising considering the number of open recs they post on linkedin.

confidantlake• 4 years ago

It is time we stop treating recs on linkedin as evidence of hiring. It is just as much an advertising tool as it is a genuine desire to hire people.

operatingthetan• 4 years ago

Exactly. I've been told this before: "we have open reqs so there can't be a layoff!" Of course one follows eventually whether there are reqs or not. The reqs are just sitting there and they aren't responding to applications.

willcipriano2• 4 years ago

Remember when everyone cut jobs and canceled orders at the beginning of the pandemic and it really bit them? I'm like 49% sure that's going to happen again. Something funny is in the air.

ctvo2• 4 years ago

Remember when everyone cut jobs and canceled orders at the beginning of the pandemic and it really bit them?

No. Did they have layoffs previously? I also don't remember anyone cancelling orders and cutting jobs at the beginning of the pandemic.

willcipriano2• 4 years ago

March 2020[0] businesses laid off millions and six months later were begging for workers.

[0]https://www.bls.gov/opub/ted/2021/temporary-layoffs-remain-h...

spamizbad• 4 years ago

I wonder if this is what drove a lot of pandemic hiring. A bunch of companies froze their hiring in March-April (some did layoffs), realized they made a mistake, and in the Summer went on a hiring spree.

A bull-whip effect, but for employment.

heyoni2• 4 years ago

Places with a brick and mortar aspect to their business had major cutbacks. Anything tech related blew up right from the start.

marcosdumay3• 4 years ago

Do you expect easy money to come back? Nearly all of the companies laying people off are the unsustainable ones.

I can imagine a lot of companies struggling to hire in a few months. But I can't imagine they being the same ones that are just firing.

brianwawok3• 4 years ago

Google? Microsoft? Facebook?

There are a lot of companies not unsustainabled, at least in the 10 year frame, that are laying off.

lmm2• 4 years ago

I think easy money is coming back. There's still a bunch of wealth that doesn't know anywhere to find returns, that hasn't changed.

xienze• 4 years ago

It’s slightly different dynamics. At the beginning of the pandemic, people thought the world was going to end (either in literal terms or just economic ones). The massive hiring came after people realized that life would go on.

What’s happening today is a result of the free money spigot being turned off. The layoffs and hiring freezes are going to be a bit more sticky.

thwayunion2• 4 years ago

I'm skeptical. I think companies are still in denial about just how thorough the upper quintile of the labor force was hollowed out during COVID. This is easy to miss -- especially in industries like tech -- where title inflation for junior workers has cause executives to over-estimate the fungability of veteran labor.

mym1990• 4 years ago

There is also a lower chance of having stimulus to soften the initial blow for those being laid off. It also seemed like layoffs at the start of the pandemic were centered around the service industry, where as now we are seeing them in a broader context.

epa• 4 years ago

In this case the maritime shipping industry has a huge oversupply of boats (compared to last year which had a huge undersupply). Consumers are slowing their spending and retailers have a lot of inventory.

PragmaticPulp• 4 years ago

I would agree with you, except for the fact that hiring was completely out of control during 2021-2022

Taking Amazon for example, look at this chart: https://www.statista.com/chart/7581/amazons-global-workforce...

Amazon's headcount literally doubled from 2019 to 2021. The recent layoffs barely move their headcount back at all.

While Amazon may be the most visible, this pattern was repeated across a lot of smaller companies. Even my employer was setting arbitrary goals to grow headcount by certain numbers last year and hired a lot of people with questionable qualifications in the process. Now they're laying people off and using it as an opportunity to cut their mistakes.

A lot of good people are getting laid off, but I have a feeling that many of these layoffs are an overdue correction from companies that were too afraid to let anyone go in the past few years. Now that the hiring market has changed to give employers the upper hand, it's only natural for them to start wanting to cut underperforming employees and focus on the people doing most of the work.

WWLink2• 4 years ago

Now that the hiring market has changed to give employers the upper hand, it's only natural for them to start wanting to cut underperforming employees and focus on the people doing most of the work.

That reeks of "I'm so sorry but with the tough financial times right now, we have to run a skeleton crew, so we won't be able to approve any of your PTO requests and we're expecting you to work long hours for the forseeable future"

Then later at the earnings meeting: "We made record profits this quarter! The CEO is getting a giant ass bonus!"

thwayunion2• 4 years ago

Amazon's headcount literally doubled from 2019 to 2021.

What you're leaving out is that Amazon's net sales literally doubled between 2019 and 2021, from $280MM to $470MM. The doubling of headcount over that period was perfectly rational and in-line with its business model.

There was definitely irrational exuberance in hiring during 2021-2022. But Amazon's exuberance was far more rational than most of tech. Ironically, Amazon both hired far more than everyone else and also over-hired less than everyone else. Unlike all of the other FAANG++ companies, Amazon is and always has been a low margin and labor intensive business.

SkyPuncher• 4 years ago

I'm of the opinion that we're just regressing to the pre-COVID trend line.

Many metrics have a huge pandemic bump that's just approaching the pre-COVID trend line. I suspect we'll see a slight overcorrection. First dipping below trend, then bouncing back up a bit, before finally returning to trend line.

Companies will adjust to supply chain issues. Workers will wisen up and move jobs. Home demand will level out with supply. People will return to "normal" work areas.

Baeocystin• 4 years ago

Reading the letter, it looks like the departing folks are being offered good severance. That makes me happy to see. I've been through rounds of layoffs myself. It never feels good, but how the company treats you if your number is called makes for a lasting impression.

coolbreezetft22• 4 years ago

I interviewed for a software engineering position here literally just yesterday.

saos• 4 years ago

we are in the process of doubling our software engineering talent and moving to single threaded business organizations to build world class products faster, and we will continue to invest in delivering best-in-class operational execution for our customers.

Will be fine.

I wonder what roles they elimated though. Good question for you to ask

blacklight2• 4 years ago

brianwawok3• 4 years ago

Only a 4 minute uncertainty window seems ok to me?

If you were CEO how would you lay off 20% of your company?

blacklight2• 4 years ago

Probably I wouldn't lay off 20% of my staff at all, unless I was really sailing in stormy waters with no way out. And Flexport isn't: there's been a slight dip in global supply chains caused by the uncertainty in China, but nothing so dramatic nor permanent that you should run and fire 1/5 of your staff - you only do that if something happens like China attacking Taiwan, and you know that for years to come trade won't be the same. It sounds to me like another Silicon Valley company laying off large chunks of their staff because everyone else is doing so: https://news.stanford.edu/2022/12/05/explains-recent-tech-la.... Or maybe because VC funds are suddenly draining for everyone?

And,if I really had to lay off so many people, I'd take a more personal approach. Invite the whole company for a virtual or physical meeting where I explain why I have to do that, why I have no alternatives, and communicate the decisions to the managers, so people can be let go after talking to a human. Not after getting an email out of the blue in their box, in the middle of a working day. This has been impersonal and faceless on so many levels.

whatever1• 4 years ago

The AMZN logistics ceo first ruined AMZN with the over expansion and then took the ceo role in flexport to do exactly the same thing.

Amazing incompetence.

greatpostman2• 4 years ago

These people just got into amazon early and rode the wave to the top. Some of them are truly talented, most were in the right place at the right time

saysAl0t2• 4 years ago

Right place and time (era of cheap money) explains the majority of our so-called genius tech CEOs.

A handful of ideas from info theory coupled with government desire to hype nation state brand does not a genius make.

None of these people have established net new ideas. Just borrowing from Gödel, Shannon, Turing, and the like.

Computer networks put the visibility, routing of logistics within reach of the masses. But we’re obliged to preserve the meme of aristocrats knowing best.

pbalau• 4 years ago

You are phrasing this as most of these people were simply lucky to be there, when the reality is that most of these people are the reason why Amazon is the top dog in online retail...

paxys2• 4 years ago

I have been badgered by their recruiters multiple times a week through the last 2-3 years. No doubt they grossly overhired during that period.

calr• 4 years ago

In my mind, Flexport is part of the "real" economy of moving atoms. They don't fall into the more fluffy "we are a startup that helps other startups start-up". I wonder if this is an early sign for a rough recession that spills outside of the current VC-backed tech slowdown.

colechristensen• 4 years ago

I’m not sure it’s that strong a signal, the covid effect on shipping meant that there was a huge backlog of stuff to ship which of course got worked through eventually. But yes one should expect an actual recession outside just shrinking the tech bubble.

moffkalast• 4 years ago

we are a startup that helps other startups start-up

Well that's YCombinator in a nutshell.

dakiol2• 4 years ago

Perhaps I'm naive, but I think companies are doing massive layoffs these days because of some sort of "domino effect".

There are companies out there who would love to lay off half their staff, but in regular times they couldn't just do it (because it wasn't a common thing, and makes them look "bad"... everyone would protest). But since nowadays every damn company is doing massive layoffs (and not unknown companies, but companies like Twitter, Facebook, Google, etc.) then they take advantage of the situation and proceed to do the same.

While we are looking forward to what’s to come in 2023, we must also make hard decisions necessary to set us up for long-term success.

This could have been said any damn year in the past, but massive layoffs is the latest trend, so why not.

zitterbewegung• 4 years ago

You are naive they just want to rehire positions at lower rates if you see in the article they are cutting 600 but are hiring for 350 to 400 people. It would immediately allow them to replace higher wages workers that have been with the company with entry level positions . Also it seems like an identification of long term trends and they figure they want to invest in automation.

dakiol2• 4 years ago

Well, that's what I said. They are doing it not because of "bad times" or "recession" or "post-covid era", they are doing it because that's what they wanted to do from the beginning. They couldn't do a massive layoff in the past because it would get them bad rep, but nowadays, it barely is a thing anymore (just look at this thread: people commenting "well, at least the severance is nice". What the hell? Massive layoffs shouldn't be seen as regular news)

hamandcheese2• 4 years ago

The roles fired and not the same as the roles hiring, for the most part.

super256• 4 years ago

The FED is currently raising rates to fight inflation. One of the FED's main goals is slowing down demand, as policymakers can't control supply.

So, to fight that elevated inflation they are killing demand, and when demand sharply drops, you can't keep paying your workers as before (because you sell less goods!).

Moreover, companies simply got fat during the pandemic and over hired. I mean, there are probably also a few (lot) companies which do what you write, but I don't think Flexport is one of them. It's more likely they over hired like everyone else. Also, you might want to take a look at the current container fright prices [1]. Pretty parabolic.

[1] https://fbx.freightos.com/

themagician2• 4 years ago

Another impact of rising rates and declining demand is decreased credit lines and increased costs.

The world, particularly business in the US, really did get used to cheap borrowing for everything. Using a line of credit for everything or acquiring massive amounts of easy to service debt has been basically a standard business practice for the last 20 years.

I am actually surprised things haven't imploded yet. So many companies have acquired massive debt that's going to become increasingly impossible to service. It feels to me like we are waiting for the first big domino to fall.

rafale• 4 years ago

Also the market is betting the Fed will not stick to their forecast and will end up lowering rates in 2023.

I tend to think they will stick to their guns: they will raise to 5+% and stay there as long as unemployment is below 4.5%

TigerTeamX• 4 years ago

Thanks for the good explanation

ec1096852• 4 years ago

They can control supply via immigration and lowering tariffs.

dpflan• 4 years ago

This is from earlier and seems pertinent: Why are there so many tech layoffs, and why should we be worried? (stanford.edu) - https://news.ycombinator.com/item?id=34339698

SilverBirch• 4 years ago

This is literally what interest rate hikes are meant to do though, and everyone plays along. You hike rates, which switches people to saving instead of spending, since no one is spending companies cut costs and downsize instead of spend for growth and hey presto, demand collapses.

In a cheap money environment you take the money and you gamble for growth, in an expensive money environment you do your best to run lean. The pain is moving between these two. The winners are the guys who did a raise at the peak and can use that cash to accelerate through the downturn, and the losers at the guys who just didn't quite get there, who now are forced into taking capital at a massively diminished valuation.

nly• 4 years ago

*Servicing debt, instead of borrowing and spending. Very few people save in the best of times.

blippage• 4 years ago

In a cheap money environment you take the money and you gamble for growth,

It's a classical Austrian economists nightmare. The argument is that cheap money stimulates malinvestment. That is to say that corporate projects that would not have made adequate returns on capital under normal circumstances seem to look feasible.

It's all fun and games until the tide turns, and then the whole edifice collapses like a house of cards because it was built on shaky premises that no longer hold.

madrox• 4 years ago

This was my initial take six months ago, but I've come to realize this is about runways. Imagine you just lost your job. First thing you'd want to do is get some idea of how long it'll be until you can get another one, then look at your budget and cash on hand to make sure you can pay the bills. If you don't, you have the options of borrowing money (which is hard and a bad deal in these circumstances) or selling some of your stuff. This is basically what companies are doing.

It's a bad deal for companies to borrow money or take big investments when interest rates are so high. If you want to avoid doing that, you need to predict when interest rates will drop and make sure you have enough cash to ride it out. In spite of being successful, some companies don't have the cash, and they need to reduce their burn rate.

pm903• 4 years ago

Amazon and Meta are at 0 risk of running out of money. They make billions in profits.

Smaller companies that are still not generating profits? Absolutely they need cuts to survive.

Both of these things are true at the same time. I’m continually surprised at how quickly people have bought the excuse trotted out by extremely profitable companies for mass layoffs. In that situation it is primarily an exercise in juicing up the stock price and keeping investors happy.

crote2• 4 years ago

Wow, that's a huge surprise.

I hadn't heard of Flexport before, but they seem to be focused on global shipping. The company I work for ships almost all of its products internationally, and we have seen a massive price hike over the last 2-3 years. Some of it necessary due to rising costs, but we know for a fact that larger-volume customers are still getting lower prices. Additionally, the well-known carriers still offer incredibly poor service - most notably when it comes to tracking shipments and providing proper updates. This seems to be exactly the market Flexport wants to tackle.

If they can't even compete in the current overheated market, something must be going seriously wrong at their end.

anm893• 4 years ago

The market right now is FAR from overheated. In fact maritime shipping is collapsing right now.

https://www.drewry.co.uk/supply-chain-advisors/supply-chain-...

Both volume and rates are down roughly 80% YOY.

crote2• 4 years ago

Trust me, we're not seeing any of that in practice yet. Although that could be because we almost exclusively use air shipping.

WWLink2• 4 years ago

That the companies are so sensitive to spikes and valleys in the market speaks louder about how badly run the companies are than anything else.

umeshunni3• 4 years ago

I understand why rates are collapsing. Why is demand / volume collapsing now? Because of slowdowns in China?

epivosism• 4 years ago

Many people seem surprised that an organization would simultaneously hire and fire. I think that's normal.

At the end of every season, the Yankees fire some players and hire others.

Old cells in organisms die or are killed, while new ones are born.

Soldiers going on missions may put down the equipment from the prior mission, and pick up new equipment.

The argument "the organization is behaving selfishly, they should just repurposing the existing organization member" is inane since the function of members of an organization depends on the member's specialty, role, purpose, and an organization's purpose can change over time.

It's really strange people act like this is some killer argument when in fact nearly every organization with multiple entities does something analogous (grow in some ways, shrink in others, at the same time)

anm893• 4 years ago

People in this thread seem to be expressing confusion as to why they would be doing this "when the economy is still so strong"

The economy is not "still strong" by most measures. Employment is still strong although there are lot's of arguments to be made that when you dig beneath the surface things are much less rosy. But it get's way worse when you look past employment.

Both volume and rates on maritime container shipping are down roughly 80% YOY. https://www.drewry.co.uk/supply-chain-advisors/supply-chain-...

PMIs are falling off of a cliff https://tradingeconomics.com/united-states/manufacturing-pmi

S&p Earnings are in steep decline off the peak https://www.macrotrends.net/1324/s-p-500-earnings-history

Consumer revolving credit is extremely high while the savings rate has fallen off of a cliff since the pandemic peak https://fred.stlouisfed.org/series/REVOLSL

https://fred.stlouisfed.org/series/PSAVERT

Housing volume has fallen off of a cliff, auto wholesale has fallen off a cliff, Major Metro Commercial real estate volume has fallen off a cliff while REITs are suspending withdraws.

All of this while tax receipts are about to drop off of a cliff while US debt to GDP and deficit to GDP are essentially at historic highs while the rollover rate on that debt is constantly increasing.

And then realize that the US is in a drastically better position than China, Europe and Japan

It seems like some of the HN crowd is very out of touch with the realities of the economic data.

abadger9• 4 years ago

This is one company i've always wanted to work for- my mother is a CTO of a company in the same space/different aspect of the pipeline so I knew this company was going to do well when it entered the YC batch, but I've never even received a screening interview. Hope i can apply once the economy recovers

warent3• 4 years ago

I interviewed a couple years back and found it to be a very weird, cold process. It's a neat business model but I don't know about their culture.

pchristensen3• 4 years ago

I’m sorry you didn’t have a bad experience interviewing. I feel like Flexport has the most balanced culture of any company I’ve worked at.

pchristensen3• 4 years ago

If you’re a software engineer, you don’t need to wait for the economy to recover. Email me if you have questions!

grey-area8• 4 years ago

A global recession is coming against a backdrop of the Fed raising rates, that is going to be very painful. A lot of people here don't seem to realise this is the case or are in denial. This is a bubble bursting, this is serious.

Lots of companies are laying off workers or at least freezing hiring because they anticipate earnings cratering, or are already seeing it happen. They haven't reported on it yet, but they will in the coming months. The layoffs will continue to gather pace, as will bankruptcies.

warent3• 4 years ago

EDIT: Thank you all for generously sharing your time in writing up such thoughtful answers.

Would love to hear more on your perspective / insight.

This is all intentional, right? My understanding is that the fed is leaning into this particularly hard in order to dislodge the stubborn housing bubble.

For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car?

Any ideas how long this could last / what the bottom looks like?

ryanSrich3• 4 years ago

2008 lasted nearly 17 months. The hard part is deciding when the recession actually started. The media and government is in denial, so they'd tell you we aren't even in a recession yet. But the rule of thumb is typically two negative quarters of GDP growth, which we hit this summer.

If you run a VC backed business my suggestion is 24-30 months of runway is a good starting point.

As far as individuals go, it's not a bad idea to mirror this advice. Have essentially 2 to 2.5 years of income saved in the event that you get laid off and can't find a job for a long time. Hopefully it never comes to that, but it never hurts to be prepared.

eloff• 4 years ago

This is all about inflation, not housing. Housing is just going to get caught in the crossfire.

If you have a low mortgage, hang onto that! Otherwise standard advice applies, try to keep at least 6 months expenses in cash or cash equivalents. Don’t make big purchases.

grey-area8• 4 years ago

If you'd like more insight on where this is going, I'd recommend looking into Jeremy Grantham.

He called this correctly in 2021, before it burst: https://www.livewiremarkets.com/wires/grantham-this-is-a-bub...

He feels there is still farther to fall (and I agree with him there): https://www.msn.com/en-us/money/markets/prepare-for-an-epic-...

Falling stock prices are really a reflection of real-world problems - while it obviously feels in the US like everything is fine (judging from the many comments saying this here on this thread), everything is not fine, companies looking at their P/L and laying off staff are not fine, and the Fed is deliberately going to cause a recession and cause unemployment to stop inflation, which is a very brutal and indirect tool to do so.

This will not be a soft landing.

qqqwerty3• 4 years ago

My understanding is that the fed is leaning into this particularly hard in order to dislodge the stubborn housing bubble.

They are trying to reduce inflation. The housing bubble certainly played a part, but inflation was hitting nearly everything. A big concern here, is that many smart people think a fair bit of that inflation was due to COVID related supply chain disruptions (which still persist, see China and COVID). So while raising interest rates will help, it may not be the right tool for the job (but it is the only tool that the Fed has, so here we are).

For an individual (someone who isn't a current business owner), does this basically mean we should continue stockpiling savings, and avoid moving (rent) / avoid buying house / buying a car?

Definitely build up your savings. The other three are more complicated. Rents appear to be finally going down in some marquee markets. So moving might actually save you money. Buying a house now feels like a bad idea, seems like the market is still carrying on from the fumes of the bubble, but interest rates are definitely having an impact. Based on historical examples, the full impacts will probably take a few years to shake out as housing tends to move pretty slowly. And buying a car, well that is complicated. If you need one, buy one. If not, probably best to avoid it.

If you do have savings, might make sense to start looking at CDs, treasuries, and municipal bonds. Interest rates are up and if you have a chunk of cash sitting around those are good ways to put it to use.

Any ideas how long this could last / what the bottom looks like?

Watching the Fed is the key here. And the Fed is watching inflation. So as long as inflation stubbornly persists the Fed is likely to keep raising rates, and that is going to impact the economy. I read somewhere that the "market" is expecting inflation to normalize in the summer of 2023. But personally that feels optimistic. I think we still need to shake off the COVID induced supply chain disruptions before things get back to normal, and that still feels like another year or so away.

rcpt2• 4 years ago

dislodge the stubborn housing bubble.

God I wish we could just do a Land Value Tax and be done with it. It wouldn't hurt the economy and might even create more work.

ryanSrich3• 4 years ago

A global recession is coming against a backdrop of the Fed raising rates

I believe we're going to double dip. We already dipped before the holidays. We'll see one more very painful quarter, which may not be Q1, but Q2 or Q3. From what I've seen, Series B+ is essentially impossible right now unless you're in the top 0.0001% of companies. Even then, if you're that operationally efficient, you might even hold off on funding until you can pull a higher valuation in 24-36 months.

As far as tech layoffs go. I think this has been coming for nearly a decade. Companies have been hiring at what seemed an insane pace for so long that it just became the norm. My personal opinions on Elon aside, he proved how bloated a lot silicon valley tech companies are/were.

grey-area8• 4 years ago

Yes, there will be more layoffs, and when earnings collapse there will be another fall in stocks.

Raising money is going to become very difficult, even for those in a good position who manage to raise, they'll be asked for a lot more of their company in return for less money.

This might be a real bear market in equities (anyone remember those?), where things are bad for years and we may see something like the 70s, where the inflation peaked twice, the second time it was worse.

heyoni2• 4 years ago

Did you read the article? They're actually hiring 350-400 software engineers. If anything, these layoffs say the exact opposite.

abirch4• 4 years ago

Elon did in the words of Peter Drucker, amputation without diagnosis.

idopmstuff6• 4 years ago

As far as I can tell, layoffs seem concentrated among high-earning folks - I can definitely see how anyone browsing HN would think we're headed straight for a recession. But it seems like overall, and especially in lower-wage jobs, employment is still humming along and people are very much not getting laid off.

That actually really gives me hope for a soft landing - those high-wage folks are much less likely to have serious financial problems like homes getting foreclosed (not to say it's not possible but they're much more likely to have a cushion to keep making payments). If they pull back on their discretionary spending plus stop doing things like driving up housing/car/stock prices by putting money into those things, that feels like it could be the basis for inflation slowing down without a huge uptick in unemployment and everything that comes with it.

notch656c5• 4 years ago

I make a good wage and the first thing I'll do if I get the boot is stop buying things from the plebs. No eating out and paying the cook. No day care paying the working class daycare worker. No buying lumber for house projects paying the logger and mill worker. No cars paying the auto worker. etc, etc. Less toys for the kid meaning less trucking and shipping work.

Compound that at scale and it will definitely have an effect.

coffeebeqn2• 4 years ago

Even more it still seems like it’s mainly companies who doubled their headcount since COVID started because someone extrapolated the madness to last forever? I sure hope the first in line for layoffs are the people who thought that was a great idea

grey-area8• 4 years ago

But it seems like overall, and especially in lower-wage jobs, employment is still humming along and people are very much not getting laid off.

There will not be a soft landing.

When has there ever been a soft landing and how would raising rates into a recession ever result in one? Raising rates takes 1 year to come through to the real economy - we haven't even seen the impact yet, only on stock prices which foreshadow the real economy and again are a leading indicator. They will raise till unemployment starts to rise.

Unemployment is the goal of this Fed policy - that is the point - cause unemployment so that inflation goes away.

RC_ITR2• 4 years ago

One interesting concept is that falling inequality will look exactly like this.

Wealthy people have gotten used to increasing the gap and therefore assume that trouble at the top is much worse below.

But what’s actually panning out is that Internet technology is great at replacing white collar jobs and awful at replacing blue collar jobs (I don’t think electricians are losing sleep over ChatGPT).

tempsy• 4 years ago

total revolving consumer credit aka credit card debt is a straight line up

going to hit $1 trillion soon for the first time. seems not great in face of high interest rates.

https://fred.stlouisfed.org/series/CCLACBW027SBOG

qqqwerty3• 4 years ago

This is a good point that I had not previously considered.

Inflation has been pretty stubborn. I assume some of that is coming from supply chain issues, but some of it also could be due to higher-earning households not being as price sensitive as they would have been in previous eras. i.e. a Google engineer is not going to really notice or care that milk is 50% more expensive. They might not even notice or care that their new car now costs $40k instead of $30k. Their annual stock options probably fluctuate by that much on a daily basis. That level of economic comfort used to be the exclusive purview of the professional class, i.e. doctors, lawyers, etc... But the tech boom has expanded that class (upper middle, lower rich?) considerably.

Will be interesting to see if this is the straw that can break the inflation camel. Overall, I am getting the impression that these layoff announcements, while grabbing headlines, are not very indicative of the market at large. But it does seem like they are picking up steam, and of course, these things can also reinforce each other. For example when you let go of 10% of your staff, that means you also reduce your per-seat SAAS software spend, and that money was someone else's revenue.

Anyways, I am rooting for a soft landing but still feel like these things are too hard to control. Would be nice if we could just let some air out of the more bubbly parts of the economy while keeping everything else chugging along. Previous recessions usually result in those who can least afford it getting hit the hardest, so a change of pace on that front would be welcome. Fingers crossed.

ramesh312• 4 years ago

As far as I can tell, layoffs seem concentrated among high-earning folks - I can definitely see how anyone browsing HN would think we're headed straight for a recession. But it seems like overall, and especially in lower-wage jobs, employment is still humming along and people are very much not getting laid off.

Shit rolls downhill. We'll see how well the service economy holds up when their client base has been out of work for 6 months.

jupp0r3• 4 years ago

Unemployment is at a record low. US economy added 223k new jobs in December. US Q3 GDP increased annualized 3.2% over Q2.

Some companies are doing layoffs (mainly those that overhired during COVID), others aren't. Look at the data instead of clickbait headlines and everything looks much less bleak.

If you are really certain you can forecast how the economy is going to do with high accuracy, get a job at some hedge fund and get rich.

abirch4• 4 years ago

Have you seen housing? https://www.usatoday.com/story/money/2022/12/01/real-estate-... it's going to get hit even harder.

Unemployment is low due to a lot of early retirement/retirement. It is obvious we're headed for a recession, the question is how bad will it be. Will China's housing market collapse?

sanguy• 4 years ago

Already seeing startups out of funding and not able to raise more being given away to companies that can assume the payroll and running costs.

We've had 5 such approaches in the past 6 weeks of which 2 we have taken over.

It is going to get very very bad inside the next 6 months. We're still in the pre-swell phase before the tidal wave hits.

grey-area8• 4 years ago

Yes, an awful lot of companies assumed the free money would last forever, and now it has stopped, they are faced with two choices:

1. Start making money 2. Sell the company

Many of them will tell themselves that they can somehow see massive growth and start making a profit, and will fail while trying to do so.

wferrell• 4 years ago

Where do you work?

ffggvv• 4 years ago

remember this company was being hyped alot on twitter the past 2 years as we had supply chain issues. glad i dont just follow the trend.

maldeh• 4 years ago

Barely two months from their announcing a hiring spree... https://www.reuters.com/business/logistics-startup-flexport-...

ec1096852• 4 years ago

They’re one of the biggest job promoters here, so it will be odd not seeing their jobs show up for a while.

Flexport always seemed to be hiring.

pchristensen3• 4 years ago

You’ll still see the jobs. Flexport is still hiring many software engineers.

Source: I’m a hiring manager for software engineers at Flexport.

JamesAdir• 4 years ago

A way to lower salaries. Fire the expensive ones, hire cheaper employees.

mensetmanusman• 4 years ago

The fed strategy will fail because the labor market will always be tight due to retirements.

pm903• 4 years ago

And lower immigration levels.

zwilliamson• 4 years ago

I’d be curious to get Peter Zeihan’s thoughts on this. Flexport’s business is built around globalization and trade. What if Peter is right and we are seeing it all unravel before our eyes right now? Trading paradigms shifting to regional groups of countries. I wonder if this is on the radar for companies like Flexport

https://en.m.wikipedia.org/wiki/The_End_of_the_World_Is_Just...

michaelteter• 4 years ago

When I interviewed with them 2-3 years ago, I recall being told that while the goal was to automate shipping, 95% of their shipping was being done with humans and human processes (due to the complex and irregular nature of shipping).

I would expect that a global reduction in shipping traffic would mean needing fewer of these people internally; so I suspect that's the bulk of the 20% reduction group.

LarsDu88• 4 years ago

I think what's missing in a lot of these articles are the headcounts of these companies in 2019. Does a 20% layoff hit as hard if the readers find out headcount at a given company is 200% larger than in 2019?

nsonha• 4 years ago

This is one of those companies that were always hiring when I checked HN's jobs page. Honestly I thought they seemed like they have trouble hiring, but good for them that at least they've hired enough to get to the point they need a reduction.

Flexport slashes 20% of global workforce over weak 2023 volume forecast

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