NORTH HOLLYWOOD CA - SEPTBER 18: Service Employees International Union member janitors... [+] protest the decision to close Toyota's only unionized plant in the U.S.A and recent layoffs by 40 percent of unionized cleaning staff at Toyota's national headquarters in Torrance, California on September 18, 2009. This was in the Los Angeles-area neighborhood of North Hollywood. In August, the unemployment rate in California rose to 12.2 percent. This is despite economic recovery signs. In August, the national rate was 9.7 percent. California is among 14 states that have double-digit unemployment rates. (Photo by David McNew/Getty Images).Getty Images
Massive corporations are preparing for 'layoffs'. According to Goldman Sachs, they are targeting 4,000 employees for their dismissal. It is unclear if that's 4,000 more than was previously sent or whether it includes them. Tech includes Amazon AMZN, Facebook/Meta and Cisco. Media: Gannett GCI.I, AMC Networks AMCX, CNN, and BuzzFeed. Pepsi and H&M are the top consumer product manufacturers. This is just a small sample. It's only a matter time if you're involved in cryptocurrency. But then, it was always so. Charles Dickens misquotes: Merry Christmas, to all, and to everyone a good bye. Companies are taking proactive measures to prepare for an economic downturn. However, they also look around and realize that the problem is not in their stars or in themselves. While reducing headcount is a popular choice at the end of the year, it's time to make some historical and linguistic corrections.
These are not layoffs. In the past, a layoff was when a company, such as an auto manufacturer, faced difficult times and sent some union workers home. They were then brought back when business improved. Merriam-Webster defines it as "to stop employing (a worker) often temporarily." This last qualifier has long been gone. A layoff today is not a mass firing. Employers won't ask laid-off employees to come back unless they are Elon Musk. He ended the employment of thousands of people via Twitter only to discover that only a few knew how to manage it. So, he issued a "sorry, my mistake" and hoped they would return to bail him out. They will probably fire them again. This has been a deeply frustrating and angering line in both business and economics for many decades. Many economists, even though they know better, still believe in the Phillips Curve. It claims that there is an inverse relationship between unemployment and inflation. Do you want one to go up? You can plan on the other going upward. A.W. Phillips was the original economist. Phillips looked at U.K. labor market data and found an inverted relationship between unemployment and wages, according to the Federal Reserve Bank of St. Louis. The St. Louis Fed notes that the relationship has been more broadly extended to include price inflation since Phillips' 1958 paper. In the 1950s and 1960s, there was a more general relationship. This relationship was more apparent in the 1950s and 1960s.
The St. Louis Fed stated that Jerome Powell, the Chair of the Federal Reserve, has been asked questions about the Phillips curve during his testimony before Congress in July 2019. He noted that the relationship between economic slack, inflation and unemployment was strong fifty years ago. He said however that the connection between economic slack and inflation was strong 50 years ago.
Wait! Someone must have given Powell and the entire Federal Reserve an enhanced stethoscope. They sure seem to be able to see the link between inflation and economic slack now. The Fed repeatedly spoke of labor and the need for lower wage growth. Powell stated less than three weeks back that the labor market is the best way to understand inflation because wages are the biggest cost of delivering core services, other than housing.
Less profits go to employees and more go to shareholders. In 1970, Milton Friedman's assertion that businesses only had to increase profits was a sign of social responsibility set off a lot of misinformation. As an economist, Friedman was able to speak as someone who has never had to manage a company or balance the many interests that make it work well. Friedman's claims are not based on morality, ethics or legality. They also lack intelligent management. His claim leads to the conclusion that profits should be maximized at the expense all other people, workers included, but also business partners and communities and customers.
Investors and managers, who are rich beyond any bounds or common sense, have embraced this madness.
There is also the second incentive, the instillation fear. Many corporate managers want to get people back in the office in the face of a continuing pandemic (Covid-19, the third leading cause for death in the U.S.). Working from home and tight labor markets gave employees more bargaining power and showed how productive people can be without being under the thumb of bosses and executives. They want to be valued by their employers. Perhaps things would run smoothly without their close and dedicated oversight.
Many CEOs believe that a tight economic environment could lead to 'layoffs' (even with high profits), and that employees would be scared, which would cause them to return to work.
Perhaps it's just a coincidence?