As tech layoffs spread, Yahoo Finance’s Jared Blikre discusses which industries could be hit next.
JARED BLIKRE: Welcome back to “What Just Happened?” now on Yahoo Finance. I’m Jared Blikre. And guess what? We’re watching job losses mount in the tech sector. But what if tech is now– who’s next?
And already we’re seeing hints of what’s to come, with blue-chip companies like Dow and 3M announcing layoffs, and even toymakers like Hasbro cutting back on staff. So I prepared some graphics today. And I did a deep dive using the BLS– that’s the Bureau of Labor Statistics– own data. And that’s the data that we report on a monthly basis coming to you next Friday for those January. Numbers stay tuned for that.
But I’ve started with some of the places where we see the job losses first. Now, these are not– well, startups and high growth is actually not a BLS category. It encompasses a number of other ones. But I put that in there because we’ve all seen those big tech headlines, some of those companies that were raising, so many employers were increasing their headcount last year, finally shedding that today.
But in general, we’re seeing that in manufacturing. Now, in manufacturing, that can cover many of the sectors that we’re typically looking at when we talk about stocks. So that could be a PC manufacturer. Could be Hasbro. It could be toys, could be anything.
Construction as well, that has to do with the housing sector. And then the wholesale trade, that’s before these products reach the retail market. So all of these tend to be indicators early on. And those will often predate what we call the recession.
Now, some housekeeping notes here, recession, as broadly defined by NBER– that’s the National Bureau of Economic Research– they’re the ones who officially declare a recession, but it’s always with hindsight. So we don’t in real time if we’re actually in one. And when we say “recession,” that’s including the entire American economy, which is a huge, huge place. So within some of these sectors, we can get a more nuanced view of what’s going on. So this is where we’re seeing those early-stage losses.
Now, in the midstage, we’re going to see that finally trickle down into retail, into financial services, into professional services. So we kind of went from some of the blue collar as well as some of the white collar jobs because that would be chip manufacturing as well into the white collar jobs, although white collar and blue collar could be involved in retail trade. So you can see there’s a real mix of different types and categories that we’re talking about here.
Now, at this stage, pretty much we already know we’re in a recession. And typically– I was talking about the recession overall for the economy– we would first slip into what’s called an industrial recession and an earnings recession. Earnings recession, so two quarters of negative earnings back-to-back– and this might be the first quarter of those– would be an earnings recession. That usually predates the general recession. And also that industrial recession that I was talking about generally occurs somewhat in line with that earnings recession.
Now, in the late stage, I actually have all these categories here. And, in fact, I could further subdivide those into two categories. So in the safe, what I would call the safe industries– and those are the industries that tend to get hit the least or even countercyclical– that would be education and health, government, and utilities.
Now, in these industries, sometimes we see an effect late in the game. That could be after the recession has already ended. And sometimes with government spending, we see that increase. The amount of employees will increase into a recession. And that’s politicians and Congress trying to make sure that the economy doesn’t head into a recession or recovers from it more quickly. So that would be a fiscal response here. But in the late stage, private sector, leisure and hospitality, information, mining and lodging, those all tend to get hit less.
Now, I should also make the point that we all have different conceptions of recessions based on what we’ve experienced in our own lifetimes. And, in fact, every recession is different. All of us remember the pandemic recession. And, in fact, that hit leisure and hospitality the hardest. And that’s when everybody took their lumps all at once, basically going back to March 20, and the economy covered very, very quickly. For the most part, I don’t even include that in a lot of my analysis because it was so abrupt and so uncharacteristic.
Now, I want to show you the last two recessions before that. This goes back all the way to 1999. So this shows the dotcom bubble bursting, as well as the global financial crisis that was more oriented toward the financial sector and also the housing sector.
So just going along here, manufacturing and construction, those tend to get hit the most. Manufacturing is this line right here. And you can see before the recession started, in fact, in 1999, 2000, barely climbed back to positive. Manufacturing had been in secular decline for a couple of decades. Construction, another one that I was mentioning, oftentimes gets pretty hard hit.
And then for all the hubbub about the financial services over the global financial crisis, it did not experience as great a dip as some of these other sectors, although for financial services it was uncharacteristically deep.
And then this orange line here is hospitality. And you can see it’s actually faring pretty well through both of these recessions, not getting hard hit as some of the others. And, as I said, we all know that leisure and hospitality happen to get hit the most.
So everything is going to be different. But it gets back to the question, where are we at this stage in the game? Everything, all the industries have inflected downwards. All these categories that I’ve been talking about inflected downwards. They’ve already peaked in terms of employment as of last year.
Two of those have not. But those have to do with the government industry. So a little bit of a footnote right there.
Are we going to plunge into recession? That’s a big question here. We’re seeing job losses accelerate to the downside. But we haven’t even seen them crack the 1% level. So none of these industries that I’ve been talking about here has even gone negative just yet. So a little bit of time there.
Is that going to happen? That’s the big question. And that’s what we’re going to be talking about in the future. And also, none of this has to do with stock timing. So that’s going to be up next, perhaps for next Friday, guys.
– Well, thank you for at least breaking down the signals that people should be looking for if we do start seeing layoffs in those sectors. Great stuff. Jared Blikre there for us.