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Did We See Holiday Layoffs Because the Vibes Are Off?

Reading this BBC article, it appears that we saw some of the holiday layoffs earlier in December because leaders feel like the vibes are there for a recession next year, even though the underlying economic data don’t point in that direction.

This year, at least, rocky economic headwinds may play a role, says Nicholas Bloom, an economics professor at Stanford University. He believes most companies that conducted these end-of-year mass layoffs did so under the assumption that an economic downturn is imminent. He calls this response a “vibecession”, where perceptions drive action – even if the data doesn’t tell a story to back up the widespread scepticism.

Other experts seemed to think this was just a case of making the year-end number look better by yanking some salary expenses out of the financial forecasts.

Shirley Lin, a professor at Brooklyn Law School in New York, is more sceptical that these cuts are unique to current economic conditions. While layoffs may particularly be high in sectors including tech and media right now, she says end-of-year job cuts are a common business practice across industries.

“Companies typically track their financials to the calendar year when reporting quarterly results,” she says. “A company’s annual reports to shareholders, which are also important to attract new investors, include last-quarter financial results.” Holiday-season layoffs then are often the result of last-minute cost cutting intended to boost a company’s balance sheet for the benefit of shareholders.

Which is it? Probably both. But, another factor that I think also plays a part in all of us being more aware of these layoffs is that the people impacted are more likely to talk about it.

Don’t get me wrong, I do understand that we’ve had unprecedented levels of layoffs, especially in the tech industry. I’m not arguing that this ridiculousness is only a change in our perception of normal layoffs. There’s been nothing normal about it.

But, as much as this is different, we live in a time when being laid off doesn’t say anything about us as employees. I remember going through layoffs at previous law firms well, where it was clear that it was a cost-cutting move, and they were deciding who stayed and who got cut based on performance. You’d see it in every announcement, internally and externally. “We’ve evaluated our staff and identified some underperforming positions that could be eliminated to save money”.

That wasn’t what was in the announcements in late 2022 and all through this year. It was more about eliminating whole product lines, high salaries, reversing bad decisions about growing teams, etc.

In my opinion, there may have been some examples of what Professor Lin describes in prior years, but we didn’t immediately see dozens of LinkedIn posts about people getting laid off and looking for work. It’s become much less stigmatized to admit it. I think in the tech industry, it’s now a right of passage. Have you really worked in tech if you’ve never been laid off? So, not only were those mid-December layoffs news, we were all aware of them. That might not have been the case in prior years.

Of course, we all know that many layoffs are about cutting expenses to increase share price because that’s the end-all-be-all of business these days. Whether it’s the fear of a stock price dip next year or firming up the price going into the new year, it’s not about employee performance, and there’s no reason to sit quietly ashamed of having been impacted by layoffs. We all know it’s not you. It’s them.

 

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