Tech giants like Meta Platforms, Salesforce, and Amazon have all recently completed larger layoffs. Thousands of additional furloughs have already happened at other companies like Ford, Walmat, and PepsiCo.
December, going back to the year 2000, has always been a heavy month for firings. The only month that traditionally has more layoffs is January.
The reason behind that is the temporary Christmas help being let go as well as the annual bankruptcy filings. Companies will wait until January to file a bankruptcy when they’re flush with cash which makes the proceedings easier.
Many have admitted to having difficulties finding the people they need to staff their companies. Others have expressed the sentiment of holding off on their recruiting activities until the start of the first quarter, thinking that the holidays are the wrong time to be hiring.
Nothing could be further from the truth. My Brothers and Sisters, the time is now.
It’s always difficult to find good people. Whether we’re in a tight labor market or not, this eternal truth will probably never change.
Many have expressed another sentiment saying that it’s difficult to compete against larger companies for new hires. Some think that they don’t have what it takes. With that in mind, I’d like you to take a look at the resumes now sitting on your desk.
Some of those people have been in the workforce for ten or fifteen years and have already been at ten or fifteen different companies. Lot’s of those people are job-hoppers, that you wouldn’t force on an enemy.
But many others are simply victims of circumstance, being the last hired and the first fired. In other words, they’re good people looking for a home.
You can jump up and down talking about medical plans and other retirement benefits. But that’s certainly less important to an applicant who’s been bounced around, actually looking for a home.
And given the stability of your company, that’s one thing you may be able to offer that other companies can’t. What’s more important to many? A steady paycheck or a dental plan?
Let me leave you with this.
The Federal Reserve Bank raised its benchmark Fed Funds rate another 50 basis points last Wednesday to between 4.25% and 4.5%. This was the lowest rate hike we’ve seen since the beginning of this year.
The markets at first responded positively and then gave back their gains yesterday as investors began considering the future. The Fed has once again reaffirmed its stance to do anything it takes to tame inflation back to their annual target of 2%.
The operative word in that sentence is “anything”.
Many are predicting further interest rate hikes of another 75 to 100 basis points next year, but I honestly believe that to be terribly optimistic. Inflation isn’t going to come down anytime soon.
We’ll probably see at least another couple of interest rate point increases next year. Maybe even more in the foreseeable future.
Back in June of 1981, during the worst recession of my lifetime, the Fed Funds Rate was 19.1%. Given the fact that banks need to make money, they traditionally charge at least another 4% when lending money.
Could you imagine borrowing money at 23.1%? Back in ’81, that’s what companies were doing. Please don’t act like it can’t happen again.
The correlations between these two periods are staggering. Inflation that won’t be tamed and a White House seemingly oblivious to the economy both come immediately to mind.
Variable Rate Loans
I’m trying to tell you that now is the time to get your house in order. If you have any variable rate interest loans, it might be time to refi those into a fixed position.
I realize that the interest rate you’ll be paying is higher than you might want, but sooner or later the interest rates will again come back down. At that point you’d be able to refi into a lower rate. This would certainly be better than continuing to pay higher and higher interest rates over the next couple of years as the economy worsens.
Real Estate Considerations
As interest rates increase, the value of real estate will certainly decrease. Prices will have to come down as money becomes more expensive.
Now isn’t the time to be on the buy side. Wait a couple of years. You may be pleasantly surprised at how much prices will recede. You’ll certainly be paying a higher interest rate. But again, you should be able to refi out of that position when rates again return to some sense of normalcy.
Recessionary Fears
As a recession looms, be smart enough to manage your cash. The Fed has vowed to do whatever it takes to tame inflation. That will probably mean pushing our economy into a recession.
Many are predicting that this will occur sometime next year. When the extra savings that many have from the pandemic finally dry up, spending will be forced to soften. That in combination with the interest rate hikes will probably create at least two quarters of negative growth. That’s the definition of a recession.
It’s almost prophetic that we’re currently celebrating the Season of Advent, which is all about the coming of Christmas. Be prepared my Brothers and Sisters.
It’s coming.
We’re all going to get through this. Let’s get through it together.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. Whether you need Employee Retention Credits, M&A Due Diligence, Payroll Services, or Accounting and Tax Work, you have but to ask. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
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