The New Era Of Layoffs, Hiring Freezes, Stock And Crypto Market Crashes
The United States has entered a new uncharted job market and economy. Since the start of 2022, the curtain has been pulled back. In hindsight, it’s clear that the booming increase in jobs, proliferation of venture capital-backed unicorn startups, the rise in hundreds of cryptocurrencies and skyrocketing stock market were all built on an illusion.
Trillions of dollars were flooded into the economy by the Federal Reserve Bank and stimulus checks. Interest rates were kept artificially low. The results of the Fed and federal government made novices feel like they were genius investors and workers so talented that they could freely quit their jobs to find new ones. It was like living in a Potemkin village. Now, it’s time to face reality.
The Fed announced that it needs to cool down the economy to fight back against inflation. When this happens, jobs are lost. This could be ruinous to families, as costs get out of control.
Lawrence Summers, former U.S. treasury secretary and president of Harvard University, said in an interview with Bloomberg that the U.S. jobless rate would need to rise above 5% for a long period of time to curb runaway inflation. Summers predicted, “We need two years of 7.5% unemployment or five years of 6% unemployment or one year of 10% unemployment.”
Mark Zuckerberg Is Ordering Hiring Freezes And Open To People Leaving
Mark Zuckerberg, who has long been the golden boy of tech, is seeing his fortunes change. The CEO of Meta told his staff that the U.S. is experiencing one of the “worst downturns that we’ve seen in recent history.” To navigate the new treacherous waters, the social media platform needs to take action, including putting a hold on hiring and husbanding resources. His goal of adding tens of thousands of jobs to build the metaverse has been significantly scaled back.
He bluntly told his employees, “I think some of you might decide that this place isn’t for you, and that self-selection is OK with me,” according to the New York Times. Zuckerberg added what seemed like a threat or foreshadowing of what’s to come, “Realistically, there are probably a bunch of people at the company who shouldn’t be here.”
The Stock Market Is Plummeting
The S&P 500, a widely followed benchmark that offers the state of the financial markets and health of the economy, plunged into a bear market. This term refers to a drop of over 20% in stocks. Last week, the stock market took a big hit, making it the worst start for the first half of a year since 1970, according to the Wall Street Journal. Bonds and cryptocurrencies also experienced painful losses.
You may think that only the rich are affected, but the unrelenting plunge in value impacts anyone with a 401(k) plan, IRA, pension, company stock plan, college fund or investments.
The Wealth Effect In Reverse
During the heady days of 2021, people felt confident in the future. They could switch jobs, throw a dart, pick a winning stock, or obtain funding for a crypto project or startup. However, the door has been slammed shut. Banks and venture capitalists are now becoming uber-conservative. When people feel that things are great, their investments and home prices continually rise in value, and their job is safe, they experience the wealth effect. Feeling comfortable and confident, they’ll freely spend money, taking lavish vacations, buying second homes, splurging on dining out and purchasing automobiles and retail products.
When they now look at their monthly investment statements, their mood has sharply changed. They no longer feel so confident. This leads to cutting back on spending. When this occurs at scale, restaurants, retailers and other sectors suffer from the lack of business. It becomes a downward spiral. People are laid off and then those people hold off on spending as well.
The uber rich are also getting a little less wealthy. The richest 500 people in the world lost about $1.4 trillion in the first half of 2022. No one is going to hold a GoFundMe for billionaires. They are feeling the pain too. Tesla CEO Elon Musk lost about $62 billion. Amazon founder and former CEO Jeff Bezos’ net worth declined by around $63 billion. Zuckerberg saw his net worth slashed by more than 50%.
Cryptos Crash And Burn
Top cryptocurrency platform Gemini laid off workers due to what is being deemed a “crypto winter.” Coinbase downsized, enacted hiring freezes and rescinded job offers.
Celsius, a cryptocurrency lender, let go of 50 employees and suspended withdrawals from its platforms last week. Sam Bankman-Fried, a billionaire who has become the go-to person for bailing out or looking to take over crypto firms in dire straits, passed on a deal to acquire the lender.
Pointing to challenging market conditions, Singapore-based Vauld, another digital asset lender, did not allow customers to take out their funds. The company also plans to lay off around 30% of its workers, pause hiring new staff and cut executive compensation.
The stock price of cryptocurrency brokerage firm Voyager Digital shares plunged around 30% last Friday after suspending trading, deposits and withdrawals. According to Bloomberg, the crypto hedge fund Three Arrows Capital filed for Chapter 15 bankruptcy in New York.
The hype over NFTs has substantially cooled down, as trading volumes are down 93% from their all-time highs.
What This Means For You
You need to forget about the past. What worked over the last year or two won’t be relevant anymore. The U.S. now finds itself in a belt-tightening, cautious environment. Stubbornly high inflation won’t abate any time soon.
Companies, feeling the pain, will lay off workers, enact hiring freezes and rescind job offers. There could be salary cuts and requirements to return to an office, as executives get nervous and want to exert control over their staff.
Costs will continue to rise due to inflation. As interest rates rise, perpetrated by the Fed, you will pay more for your mortgage, credit cards and student loans. To whip inflation, the Fed and government will toss cold water on the economy. This will make it substantially harder to hold onto your job or find a new one. You’ll need to make yourself indispensable to your boss and company.
Don’t make any drastic moves. There is a chance that things could change. For example, the economy may cool down fast, and the Fed could relent on raising interest rates. There could be other possible positive changes too.
To play it safe, put money aside and try to diversify your income. Avoid buying on credit or making large expenditures. Even if your job feels safe, keep contacting recruiters and interviewing to hedge your bets. Keep in mind that this is not a rare occurrence. The economy goes through boom-and-bust cycles on a fairly regular basis. So hunker down, stay strong, and, before you know it, the pendulum will swing back toward growth mode.