Without Easy Money, the Tech Sector Faces Layoffs and Losses, by Ryan McMaken

Seems like there are a fair number of zombies even in tech land. From Ryan McMaken at mises.org:

The tech sector in the US has benefitted from more than a decade of ultralow interest rates and easy money. But now it looks like the easy-money era may be ending—at least for now—and that means problems for the sector so long wedded to cheap loans.

Just a year ago, the ten-year Treasury’s yield was 1.4 percent. This month, however, the ten-year’s yield is up to over 3.6 percent, and throughout the economy, debtors are finding that debt service isn’t nearly as cheap as it used to be. Employers in the tech sector are responding as one might expect. Meta/Facebook has announced eleven thousand layoffs. Amazon will soon lay off ten thousand employees. Twitter has laid off at least thirty-seven hundred employees. Stripe, Microsoft, and Snap have each laid off about a thousand workers. Salesforce and Zillow have laid off hundreds. Dozens of other firms have slowed or frozen hiring.

Thanks to rising debt costs, employers need to cut costs, but many employers will soon be facing declining revenues as well. Given that a multitude of indicators point toward an approaching recession—the yield curve is now the most inverted it’s been since 1982—this is likely just the beginning.

What we’re witnessing is the end of the latest tech bubble, and what seemed like rock-solid companies set to expand effortlessly forever will suddenly be characterized more by cost cutting, falling revenues, and a hard slog in search of more capital.

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2 responses to “Without Easy Money, the Tech Sector Faces Layoffs and Losses, by Ryan McMaken

  1. Well that’s just too bad.😂

    Like

  2. Feel good story of the day.
    I guess learning how to code didn’t work out?

    Like

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