A Tale of Two Recoveries

It would be hard for anyone to argue that the American tech sector is in excellent shape right now. In addition to the collapse of Silicon Valley Bank, Big Tech companies have enacted wave after wave of high-profile layoffs, with thousands of workers unceremoniously dumped (often via emails using<a href="https://www.washingtonpost.com/business/interactive/2023/tech-layoffs-company-memos/?utm_campaign=wp_news_alert_revere_trending_now&utm_medium=email&utm_source=alert&location=alert" rel="noopener ugc nofollow" target="_blank"> very questionable language</a>) every few weeks. If you look closer at the numbers behind those layoffs, you’ll notice that the tech industry isn’t exactly in danger of going extinct. Microsoft laid off thousands of workers after its profits fell by 12%, for instance, but the company still made $16.43 billion in profits in the last quarter of 2022. And while Amazon has <a href="https://apnews.com/article/amazon-layoffs-jobs-cuts-jassy-0e857f39702de134c8f677c5b5731688" rel="noopener ugc nofollow" target="_blank">laid off 27,000 employees this year</a>, that’s a relatively small sliver of the <a href="https://www.geekwire.com/2022/amazon-is-dramatically-slowing-its-hiring-pace/" rel="noopener ugc nofollow" target="_blank">381,500 employees </a>the company added during the first two years of the pandemic. But still, after nearly two decades of unstoppable growth, the tech sector is currently in chaos. Stock prices and profits that always seemed to float ever-higher since the first dotcom bubble burst in the early 2000s are now suddenly subject to the laws of gravity. Because of that 20 years of dominance, tech’s sudden moment of weakness has left people feeling skittish about the economy. Will those layoffs and bank failures continue to spread throughout the rest of the American economy? I wanted to call your attention to some analysis from Bloomberg’s Joe Weisenthal that was buried at the bottom of <a href="https://www.bloomberg.com/news/newsletters/2023-03-29/five-things-you-need-to-know-to-start-your-day?cmpid=BBD032923_MKT&utm_medium=email&utm_source=newsletter&utm_term=230329&utm_campaign=markets" rel="noopener ugc nofollow" target="_blank">yesterday’s Five Things You Need to Know to Start Your Day newsletter</a>, because it rings true, and not enough economics reporters are saying it: “What defines this economic expansion is that it’s bottom up, not trickle down. It’s consumer strength, particularly in the middle and lower levels that keeps it going,” Weisenthal writes. <a href="https://medium.com/civic-skunk-works/a-tale-of-two-recoveries-3bc1d216f045">Read More</a>