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Friday, July 22, 2022
Today's newsletter is by Myles Udland, senior markets editor at Yahoo Finance. Follow him on Twitter @MylesUdland and on LinkedIn.
Earnings season is underway and investors are keen on getting the same insight from every public company out there: Are we heading into recession?
Some companies will say yes. Others are less certain.
In any case, there is no doubt the broader economic environment can be blamed for all manner of business challenges. For instance, a slowdown in soap and candle sales.
But often lost in these "here-and-now" discussions of the economic environment is what we're exiting: A period of unprecedented fiscal stimulus and financial speculation which warped expectations about both financial markets and the broader economy.
And a recent report on layoffs from crypto company Blockchain.com reminded us of this crucial context.
On Thursday, CoinDesk reported that Blockchain.com would lay off 25% of its staff. That would add Blockchain.com to the list of crypto firms including Coinbase (COIN), Gemini, and OpenSea that have announced staff reductions in recent weeks.
But in its story, CoinDesk noted Blockchain.com's cuts would return its staffing levels to those seen at the beginning of this year — and this after cutting a quarter of its workforce.
For those employees now out of work in an industry that is mid-process in a rapid contraction of optimism and enthusiasm, this is little consolation. As The Information's Kate Clark tweeted the other day, there have now been over 53,000 startup employees laid off so far this year.
Companies resetting themselves back to the staffing or investment levels that were appropriate just 8 months ago isn't quite a recession. It's more like a reset.
Notably, "reset" is the word Fed chair Jay Powell used back in June when talking about current pressures in the housing market. And as a report from Redfin published Thursday showed, those pressures continue to build apace.
Earlier this week, we argued the signal from corporate hiring announcements was not necessarily recessionary but certainly cautionary.
Basically, the world most management teams planned for in 2022 has not come to pass. And given the surprises facing businesses amid a rapid rise in interest rates, companies are just trying to adjust to the present rather than signaling something about the future with the recent spate of hiring and investment announcements.