Comment by toomuchtodo 4 days ago
The Fed begins cutting rates Wednesday (25-50bps), and will land near 2.5-3% by end of 2025. Assuming traditional macro policy outcomes, the tough market is transitory (with my apologies to Powell).
https://www.bloomberg.com/news/features/2024-09-15/is-the-fe... | https://archive.today/5B8Tk
Plus there is latency on the supply side. A lot of people were drawn by the crazy compensation starting about 10 years ago and accelerating during Covid, so that there is a huge amount of new developers out there. Plus due to the internet and mobile devices we're all more connected so the existing pipelines in developing countries are all also pointed at developed countries, bringing in even more supply.
I wonder what's the number of developers today compared to say, 2014, but I wouldn't be surprised if it's 2x if not 3x.
Unemployment rate doesn't give you the full story. It's always been a suspect metric in my opinion, kind of like how people use Kelly Blue Book values for cars. It's not a good reflection of the real world complexities. I'm not unemployed, but I'm also stuck in my current position because of the 100 applications I may have applied for, I get a response from 1 and I may not even make it to the interview phase. Pre-2020 that would've been 1 in 10 applications. Unemployment rate doesn't capture that. It doesn't capture stress levels due to lack of mobility between employers, nor people that have given up, nor part time workers, etc
A study cited this month in a Wall Street Journal article has the IT unemployment rate at 6%.
https://www.wsj.com/articles/it-unemployment-hits-6-amid-ove....
People on hackernews think tech is the whole economy.
the recession and bad job market we are in. you can believe what you see in real life or what you are told in media.
Honestly do not get this perception at all. Have you ever live through an actual recession? Did it feel like this at all? I see some significant secular changes. Some industries are just changing and leaving some people in the cold and they'll be forced to adapt. Media in particular is just not the same kind of business it used to be and never will be again. I do not see any cyclical downturn. Just amongst my network, everyone is working, hiring is a bit slower but it's happening.
General employment includes working in pizza shops, factory floor sweepers, car salesmen, janitors, deboning chicken, making Happy Meal boxes, and of course tech jobs that pay low six figures.
To me it seems we have alot of the former (several food places that specialize in lunch are closed monday and tuesday due to not enough employees) but the latter is tough right now.
But the general unemployment metric is solidly good.
Big tech companies have been making record profits year after year and their share prices are at record highs. Competition in the tech job market isn't due to Fed policy, it's because companies figured out that they were overstaffed and could afford to lose the headcount. That isn't going to change moving forward regardless of what the interest rate is.
You think they all magically figured out they were overstaffed at the same time? It's 100% herd mentality. They're cutting because everyone else is cutting, just like they went on hiring sprees because everyone else was doing the same.
It's easy to measure short-term impact (we cut a bunch of people, we're saving money, we're more profitable) but it's very hard to measure the medium to long term impact of these cuts.
Note I'm not arguing these cuts are the wrong strategy, I'm arguing they have absolutely no clue.
It's unreal how people think tech leaders are geniuses when they keep doing this stuff. Oops we overhired but I take "100% responsibility" however the staff will take 100% of the punishment by being laid off. All while spending $32 billion on legless VR worlds that nobody wants or driving social media giants into the ground. It's Gell-Mann amnesia. Remember how dumb their last decisions were, by their own admission.
A lot of well funded VC startups poached liberally from big tech. A lot of VC money dried up (and some is now dry powder) because of higher interest rates.
If money pours back into VCs and they turn on the spigot again, you'll absolutely see the market change. Will it be significant? Maybe not in the grand scheme of things, or maybe it will, but to act like interest rates don't matter at all is silly.
> it's because companies figured out that they were overstaffed and could afford to lose the headcount.
Well yeah but why were they suddenly overstaffed? It wasn’t some kind of collective paranoia. It was interest rates. With low interest rates, investors want you to prioritize growth. With high interest rates, its profitability.
It's never going back to the level of the pandemic again. It might improve... but those days are over forever. They were hiring people as SWEs who could hardly read and write.
Tech market is interest rate sensitive, broadly speaking.
Not so fast. "Strangely, America’s companies will soon face higher interest rates" by The Economist [1] explains why Fed cutting rates will not translate into easier money for US companies.
Maybe but they’re facing political pressure from the left, like Elizabeth Warren, to basically make the economy at least look good artificially. And they may do that. Will it be a sustainably better economy? I doubt it given federal debt and what feels like shaky employment levels.
Cutting 75 basis points instead of 25 or 50 (as Warren is and others are advocating for in the letter they sent Chair Powell) isn't attempting to make the economy "look good artificially." I strongly believe it is important to demonstrate this signaling is not about optics. It is to put more effort into preserving the health of the labor market by pulling forward rate cuts the Fed will be performing regardless (with some amount of risk of inflation being a bit sticky). If you are familiar with her background, this should come as no surprise (labor > capital and other econ metrics). She's doing her job by advocating for an aggressive monetary policy stance (imho). This also aligns with Fed statements recently indicating they are willing to act to protect the labor market.
https://apnews.com/article/federal-reserve-inflation-powell-... ("Powell stresses message that US job market is cooling, a possible signal of coming rate cut")
> “We’re not just an inflation-targeting central bank,’’ Powell told the House Financial Services Committee on the second of two days of semi-annual testimony to Congress. “We also have an employment mandate.”
> Powell told the House panel on Wednesday that to avoid damaging the economy, the Fed likely wouldn’t wait until inflation reached its 2% target before it would start cutting rates.
75 would shock the market & probably hurt Warren's party. 50 has been stated as something that may scare the market into thinking the Fed is worried more than letting on. They could maybe do 50 if they give a lot of context & forward guidance & take the next meeting off of rate cuts instead of the expected 25, 25, 25. Many are also very concerned we could make inflation sky rocket by cutting to fast, especially if the next president were to increase tariffs on a lot of goods.
I sometimes wonder if Warren is playing 3D chess. I assume she is far smarter than me on these topics but her proposals often make no sense to me. She also never gives good logic to the public behind them, even on long form one on one interviews with someone sympathetic to her cause interviewing her.
Fed also really did not want to cut rates this close to the election. They want to be neutral but they've done a great job of forward guidance & reacting to the data.
You can hold that opinion, and there may be some merit to it (I’m not sure), but in doing so you also have to accept that the Federal Reserve faces pressure from the right to make the economy look artificially better under any given administration as well. Personally, I think we need to strengthen and trust, and fix our institutions versus casting doubt on them. Once they are too politicized or otherwise destroyed, we don’t get them back and that seems to cause preventable problems.
With respect to the national debt, neither party really has a great track record over recent years, in my opinion. It ballooned under Donald Trump as well. Neither party is particularly inclined to reduce it since it has yet to cause any real problems. To “fix” it you’d have to cut spending and also raise taxes. Nobody seems to want to undertake those actions.
If you're counting on this for a recovery, you're in for a bad time. Remember, the drop is quick, the recovery is slow as molasses. It's going to take so so so much more for things to turn around and I doubt we will ever see the 2020-2022 days of high salaries and full remote again. I hope and pray I'm wrong, but after nearly 20 years in tech, my gut says we are in for some hard times ahead.