We live in puzzling times.
As the world reopens as governments in most countries shift from a Zero-COVID-19 strategy to Living With COVID-19, the expectation was that 2022 would be a better year for the job market and job seekers.
Instead, what we have seen in the first half of 2022 is a wave of retrenchment exercise across many sectors. While job cuts in sectors such as cryptocurrency (Coinbase, Crypto.com, Gemini) are understandable given the “Crypto Winter” that people are talking about, the cuts in other sectors such as e-commerce (Shopee), electric vehicles (Tesla) and finance (Stashaway, iPrice) come as a bigger surprise.
After all, most technology companies have already enjoyed tremendous growth over the past two years despite the pandemic and should be, if anything, stronger than they were before.
And even if projected growth is slower now than it has been the past two years, surely the e-commerce, electric vehicles and finance industry are not going away anytime soon. It’s not like we are talking about healthcare or rubber companies here.
So, what has changed?
The Story So Far
There has been a confluence of reasons that have led to recent retrenchment among some of the biggest and fast-growing sectors. In the US, inflation is at its highest rate since 1981. That has prompted the Federal Reserves to increase interest rates to curb inflation (and growth). The logic here is that if interest rates increase, businesses are less likely to borrow and grow and this should help reduce inflation.
Elon Musk, whose company Tesla is down about 45% and is now trading at about US$650, down from USD$1,200 at the start of 2022, has shared (according to Reuters) that he has a “super bad feeling” about the economy and has told his team at Tesla “to pause all hiring worldwide”. And being one of the biggest proponents of growth companies, this is certainly a viewpoint that other similar growth companies can’t afford to dismiss.
The simple fact is that to combat a potential COVID-19 recession, the US Federal Reserves took extraordinary measures to mitigate the economic fallouts and support the economy. This came in the form of an aggressive quantitative easing program, where interest rates were at near-zero levels to induce companies to borrow, expand and hire workers. On an individual level, unemployment payouts were given – likely fueling some of the reasons leading up to The Great Resignation.
In Singapore, we see similar initiatives. While individuals receive financial support such as the Temporary Relief Fund and COVID-19 Support Grant, businesses enjoyed grants such as the Job Support Scheme (JSS) and the Job Growth Incentive (JGI). These were schemes that were meant to encourage companies to not only retain workers (JSS) but to encourage them to hire more people during a period when the government was rightfully worried about unemployment.
Not surprisingly, it’s the fast-growth, well-funded VC-backed companies that took the chance to capitalised on this opportunity (if you were a restaurant back in 2020, hiring would be one of the last things on your mind). Along with a low cost of capital that these companies can access through their VC investors, they also receive government subsidies for their full-time hires.
Are The Good Times Over?
Think about it. For anyone who found a new full-time job in 2020, it’s unlikely that you would have got a job in industries such as F&B, hospitality, or tourism because these sectors weren’t even hiring.
Rather, a job secured in 2020 would likely be a work-from-home role in tech and digital role. And this expansion is likely supported by the generous QE and subsidies programs around the world.
But now, to curb inflation and because subsidies cannot continue forever, many of the companies that could have (over)expanded in the last two years are taking a step back to focus on sustainability and consolidate their growth. And this, unfortunately, means possibly having to shed some head count.
Out of curiosity, I went to research the staff headcount growth over the last couple of years for some of the companies that are now retrenching.
Coinbase – Start of 2021: 1,250 employees. Currently about 5,000 employees. They increase their staff headcount by 4 times in less than 2 years.
Crypto.com – In a blog entry, they said they have about 900+ employees in Feb 2021 and just about 250 staff prior to the 12 months before that. Now, they have about 4,000 employees.
Tesla – Had 48,016 full-time employees as of the end of 2019, 70,757 as of the end of 2020, and 99,290 as of the end of 2021. (Source, Source)
Sea (parent company of Shopee) – 29,800 in 2019, 33,800 in 2020 and 67,300 in 2021 (Source)
The point here is that for many of the jobs cuts that we are now seeing, it appears to be roles that could have just been created in the last two years, possibly induced by the liberal QE measures, low-interest rates, and easy access to VC funds and government job subsidies.
And now that these easy sources of financing are no longer available, these jobs may no longer be retained we might just see The Great Resignation becoming The Great Retrenchment.
Read Also: Are Singapore Employees Part Of The Great Resignation?
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