Although I have not really discussed it here since securing a job in February of this year, I have continued to follow the developments of layoffs and company closures in my industry. Part of that is purely a professional interest: directly or indirectly I am impacted by the health of the industry. Part of that is the same reason people troll the obituaries - to see if anyone they know has died.
As you might imagine given the rest of economy, things are not great.
The kicker for me was last week when at least one company a day from Monday to Thursday (two on Tuesday and Wednesday of that week) announced layoffs and or closures. For the close as of yesterday, that was 128 companies to date. That does not include the unannounced layoffs that many companies have which are either too minor or not required to be reported.
The week's layoffs were a mix of reasons as they often are: FDA refusal to approve with a request for more data the company cannot financially afford to fund. Failed clinical trials that result in not moving forward with late stage drugs thus pushing the company back to the beginning of the process. In one case, being thrown out of their headquarters because they failed to make a loan payment.
It is not unusual for this to happen to small companies: start up biopharmaceutical is very much a high risk-high reward business. But it was not just smaller companies. Larger companies with what seemed like sufficient funds or even very large companies with products on the market are making cuts now.
Why? That math does not seem very hard to follow. They see the future, perhaps far more clearly than our economic experts or policy pundits do. They see straightened and diminished cash flows and are taking pre-emptive action now.
My opinion? This will get worse. As we continue to the end of the year more of the smaller companies that are on the edge will close up shop in a financial market where funds are not forthcoming. And larger companies will continue to respond in advance to the market they see coming - not the markets the economists or politicians say exists, but the real one that does exist.
The problem with believing your own press releases is eventually you get caught in them.
And we're continually being asked "What do you believe, our press releases/MSM reports or your lying eyes?" Thanks for the insights in your industry TB, good to discover actual facts.
ReplyDeleteNylon12 - I obviously have a passing interest in the overall health of my industry. To be fair to the cynics, the point could be made that "Well of course that is true - but you are not accounting for the new companies that are being created or going through hiring bursts." True as far as it goes of course, but early stage companies hire in dribs and drabs but not in the sorts of numbers that layoffs encompass. And even large companies seldom do hires even in the 10's let alone the 100's.
DeleteI tend to push back the more I am pushed to believe a narrative. And the narrative here is pretty clear if one gives it even a passing glance. The only good thing to me is that the disconnect is so obvious that it cannot glossed over.
I've been reading a lot about A.I. and the future it may bring and all of the forecasters in the know seem to think micro adjustment layoffs might become more common as quantum computers running A.I. are able to micro adjust multitudes of business variables to maximize profits, something our current digital computers running A.I. aren't able to crunch fast enough.
ReplyDeleteThat is interesting Ed, and I have no doubt that it will be tried. I do wonder about the application in skilled industries of many varieties. It is very easy to lay people off - the term "micro adjustment layoffs" seems very apropos of where we are - but it is hard to bring people up to speed quickly on complex processes. In fact it can take months. I am not 100% sold they will get the results they are hoping for in the long term.
Delete