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Corporate Layoffs And The Downfall Of U.S. Real Estate

People in the U.S. workforce are at risk as the storm of corporate layoffs begins. Job losses will reduce consumer spending & demand for housing will decrease.

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  • The U.S. workforce is at risk as the storm of corporate layoffs begins.
  • Meta, Netflix, Robinhood amongst companies to announce mass layoffs.
  • Job losses to reduce consumer spending and decrease demand for housing.

Corporate layoffs have arrived.

Staff members are in the crosshairs of corporate layoffs, evidently with a new set of cuts every other day.

The U.S. workforce is at risk of being laid off due to stagnant business growth and rising labor costs. Several companies have announced plans to lay off thousands of employees. Earlier this year, Mortgage startup Better.com, laid off approximately 4,000 people. The company was best known for the CEO who fired staff via Zoom video.

According to Business Insider, a leaked Meta (Facebook) memo stated that the company is freezing hiring through the end of the year. The company stated that it would reduce hiring for most mid-level and senior-level roles, citing pipeline reevaluations and “slowing its growth accordingly.”

In late April, financial trading platform, Robinhood, announced that it will lay off 9 percent of its full-time employees. Also in late April, dozens of Tudum employees were laid off just months after they were hired by Netflix. The stock plummeted after the streaming service reported losing 200,000 subscribers.

According to The Information, Reef Technology is laying off as many as 750 employees, some cuts beginning as early as this week. Techcrunch announced Thrasio, Cameo, On Deck and MainStreet also announced mass layoffs.

On Tuesday, Forbes reported that as many as 1,000 of Twitter’s 7,500 employees could soon be getting the boot.

What could be causing corporate layoffs?

Mass layoffs are thought to be the result of inflation and job changes experienced during the pandemic. In the last few weeks, stocks have plummeted and cryptocurrencies have dipped.


source: tradingeconomics.com

Fear over a recession on the horizon, the U.S. getting involved with the Russia and Ukraine war, and domestic political tensions are some of the issues that have been raised, according to Forbes.

Mass layoffs and their impact on real estate.

It is certain that a mass layoff will inevitability hurt the U.S. housing market. Job losses will reduce consumer spending and demand for housing will decrease. There is a chance that homes will sit on the market for a long time as unemployment develops.

According to a report by FirstTuesday, when employees are laid off, the need for office space, commercial space, and industrial space is reduced by an equal or greater amount. Likewise, there is an increase in single-family residential vacancies as nonresidential vacancies increase. Further data suggest that with every ten jobs lost, six people will not be able to purchase a home or retain the home they already live in (unless they have cash reserves).

The ability to repay a mortgage can also be negatively impacted by layoffs. An analysis from the RBA suggests that a 1 percentage point increase in the rate of unemployment can lead to an increase in the mortgage arrears rate of about 0.8 percentage points.

In addition to threatening the mortgage industry, the article highlights that sustained unemployment could indirectly affect housing prices, through weaker rental demand and downside risk for higher rental vacancies and lower rents.

A Recession is Possible.

The real estate market has been in a state of low inventory and high demand. Although recent data shows a slight increase in activity, market demand continues to outpace the housing supply.

Current research does not indicate a similar 2008 housing crash, although many experts are suggesting that the U.S. will soon enter a recession.

corporate-layoffs-home-value-chart-2008-2022

A December 2013 U.S. Bureau of Labor statistic report, predicted that by 2022, the unemployment rate is projected to equal the NAIRU, at 5.4 percent. However, as of April 2022, the U.S. unemployment rate was 3.6 percent, accounting for 5.9 million people.

As corporate layoffs heighten, will the U.S. match a prediction made in 2013?

Will our real estate market come to a screeching halt? Or are we on the verge of economic turmoil?

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Crypto

Bitcoin Price Plummets – What’s Next for the Crypto Markets?

Bitcoin Price plummets roughly 50 percent since its all-time highs. It is on the verge of being the worst five-day stretch since March 2020.

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Bitcoin price takes a dive, should investors be concerned?
  • Bitcoin Price plummets roughly 50 percent since its all-time highs.
  • Federal Reserve raised its rate by half a point to fight inflation.
  • Many companies and platforms are active in promoting the use of digital currencies.

May doesn’t appear to be a good month for investors in cryptocurrencies.

Since its all-time high of $67,802 USD in November 2021, the market has continued its downward trajectory. The price of digital currency has fallen roughly 50 percent since.

As of Tuesday morning, Bitcoin, the world’s largest cryptocurrency is down to $31,540,¬†according to data provided by CoinMarketCap.

It is on the verge of being the worst five-day stretch since March 16, 2020, when it fell almost 38%.

As of Tuesday morning, the price of Ether was $2,381.32, which is close to 6 percent below its price on Sunday.

Bitcoin Price | 3-day Ether Trading Chart

72-Hour Ether Trading Volume (Source: CoinMarketCap)

The price swings of Cryptocurrencies have been well known. After many years of being dominated by individual investors, hedge funds like Blackrock and money managers have started to exercise control over the markets.

Crypto markets have moved in tandem with traditional markets as professional investors begin trading these digital assets. Similar to technology stocks, many institutional investors buy cryptocurrencies as risk assets. During times of turbulence, investors tend to retreat to safer corners of the market like real estate.

The stock market dropped last week after the Federal Reserve raised its rate by half a point to fight inflation.

As Americans are forced to pay more for home mortgages and auto loans, Fed Chairman, Jerome Powell was explicit in that rate increases the Fed already has in mind may be disagreeable, stating that they were:

Not going to be pleasant.

There could be more increases during the summer, according to Powell.

Some of the central bank’s $9 trillion asset portfolio is also being sold.

With investors bracing for rising interest rates, the prices of cryptocurrencies have been stagnant for much of the year. Over the past 24 hours, the market volume in the crypto market has been more than $200 billion, according to TradingView. The global market for digital currency fell to over $1.5 trillion.

Bitcoin, Ethereum, and other cryptocurrencies have seen an uptick in investment and activity over the past year, and this has led to an increase in the number of platforms and companies interested in promoting their use.

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