January 27, 2023
Almost every day we have been hearing the news of tech layoffs, most recently Alphabet (Google) and Spotify each announcing a 6% workforce reduction. While layoffs often point towards a weakening economy, we believe these headcount reductions primarily reflect idiosyncratic factors in the tech industry and have a relatively limited read-through for the rest of the US economy. The continued tight labor market outside of the tech industry is evidence of this and is also cited by the Federal Reserve as a primary reason for its rate hikes. The US economy continues to expand with Q4 2022 GDP growing 2.9%, quelling fears of an imminent recession.