IN-DEPTH: TRANSCRIPTION - UnderTheLens - 02-22-23 - MARCH – Labor Layoffs Looming!


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Thank you for joining me. I'm Gord Long.

A REMINDER BEFORE WE BEGIN: DO NO NOT TRADE FROM ANY OF THESE SLIDES - they are COMMENTARY for educational and discussion purposes ONLY.

Always consult a professional financial advisor before making any investment decisions.


In this session I want us to focus on a looming surge in layoffs which is currently getting little media attention but is extremely important.  As I will attempt to illustrate this is because government statistics are somewhat misleading.

They are misleading for two reasons:

  1. Layoffs are a lagging indicator and the media focuses on Current indicators with some prognosticators actually talking leading indicators,
  2. The US Government, like most governments are prone to politicizing and distorting economic statistics.

You may not agree with the latter but it is a hard reality as long time Fed Governor Kevin Warsh recently came clean on during a Fox Business interview with Larry Kudlow – more on that later.


I show here the agenda I will take us through to hopefully give you a perspective you are not getting in the mainstream or business media.


I want to start by giving some required perspective on Employment, Unemployment and Layoffs. I will try to make our discussion as much about the global view as the US situation. The numbers on a global perspective being much harder to unearth!


You will recognize this diagram from this year’s Thesis Paper entitled “A Great Stagflation”. I have been quite clear that though I believe the main economic developments outlined here will unfold over this decade, when and degree of amplitude of each will not be nearly as orderly and symmetrical as this illustration suggests.


One of the key milestones I felt needed to be specifically labeled in this schematic based on our research was the importance of the impact of potential surging unemployment.


The World Economic Forum highlighted the “Cost-of-Living” as the number one out of ~32 major issues world economic, political and corporate leaders expressed in the survey leading up to the this year’s Davos Global Summit in January.


Even in this year’s 2023 Macro Themes, almost all our Themes had an element of jobs, earnings and employment.


US Real Disposable Personal Income fell over $1 Trillion in 2022, the second largest percentage drop in real disposable income  ever – only 1932, the worst year of the Great Depression being worse since economic data was tracked.


This should come as no surprise to our long time readers of our research. In this chart from 2011 (see the copyright in the bottom right corner) we already had roadmap of where we were going  as we came out of the 2008 financial Crisis and launched  round one of Quantitative Easing.


We had placed ourselves on a predetermined path of Monetary Malpractice that BY 2012 was clear would inevitably lead to Dysfunctional Financial markets marked by  mal-investment and delusion.


Our 2013 Thesis paper was written to bring this roadmap into clear view.  It is available on the web site or by clicking “Update Profile” at the bottom of your weekly newsletter mailer.

The reason I highlight Statism is because what Statism real means and encompasses

It means big government, centralized control, higher taxes, fees, licenses, restrictive regulation and shrinking opportunities.

It means getting less for more in disposable income, versus less for more in a fully operational capitalist system.

It means higher interest rates, Macro Prudential policies of Financial Repression, QE for the state, and capital controls as needed to get money where it is needed by the state.


We are clearly there now as even this recent concerning chart from the IMF highlighted.


The 40 Year era of what has come to be called the “Great Moderation” has come to an end.

  1. Globalization delivered lower costs for consumer goods through cheap labor. Globalization has slowed and in some areas is beginning to reverse as Supply Chains are re-assessed and “on-shoring” begins to occur in the areas of strategic materials and goods.
  2. Financialization delivered cheap finance rates for asset appreciation. It has also reversed as interest rates have surged through critical long term overhead resistance levels.
  3. Mercantilism employed by first Japan and then China has reversed which had delivered an over-priced US dollar and a corresponding unprecedented US consumption level of 70% of the economy.

This shift in all three of these as a direct fallout of the Covid-19 Shock was long overdue and a natural consequence of the US addicted to consuming more than it produced.


As these shifts unfold with sustained levels of elevated inflation we can expect risk to be re-priced. We have already begun to witness this with asset prices, but it will get worse as duration risk premia in Bonds increases as well as equity risk premiums.

This will lead to margin pressures and pressures of operating costs. Many overleveraged and Zombie corporations will feel the pain and layoffs will begin.


We aren’t there yet but our work in this year’s Thesis paper suggests it is soon to unfold

We came at it from a strictly analytic perspective after overlaying untold economic indicators going back to WWI.


The synthesis delivered this chart of the US Unemployment rate.

The US Unemployment rate is highly likely increasing to a shocking 10-12% over the next 12-24 months.


One of the precursors of such a rise in unemployment is a broad based collapse in consumer confidence. This is evident if you look at consumer confidence on a worldwide basis.  Personally I have never seen anything quite like this before!


Like I showed earlier, the US has not witnessed a collapse in real disposable income like we experienced in 2022 since the depths of the Great Depression in 1932.


This is all some pretty seriously negative and frightening news!. But all the happy talk coming out of Washington is in stark contrast!

Former Fed Chair and now US Treasury Secretary is pretty clear about how good things are.  I was shocked at the lack of insight this recent statement made by her showed in her thinking.


On the surface this makes academic sense!  So let’s look at the Employment reporting putting out by the US Government’s Bureau of Labor Statistics.


The latest release was an absolute shocker as many of you are well aware. At 8 Sigma it was off the charts against expectations.

Apparently we created 517,000 new jobs!

This fractured every labor trend line out there and most critically reversed the expectations for the Fed to soon start cutting rates, buying the Fed more critical time to fight inflation.


As a consequence the corresponding unemployment rate Janet Yellen trumpeted fell to her 53 year low.


This shocker begged a lot of obvious questions.

What was quickly evident for anyone bothering to take the time to actually study the numbers was that three major adjustments were made to the statistics and methodology.

 1- Seasonal Adjustments were changed for 2023 – As usual no details were actually given on what went into those mysterious numbers

2- The Household Survey used new US Census Data for the first time,

3- Adjustments were made to the Population Estimates for the Household Survey sampling.

As this only notice that accompanied the release stated the population estimates reflected changes to net international migration. updated vital statistics and improvements in estimation methodology.

It is anyone’s guess what international migration is actually referring to other than illegal immigrants crossing the southern border; or what vital statistics needed updating; or what estimation methodologies needed improvements?


The report also uses a new terminology called the “Population Control Effect”.

Basically they used the Household Survey which argued that 894,ooo jobs were added in a single moth which defies anything ever seen. Uncomfortable with that they actually state that 810,000 of these jobs were added by this “Population Control Effect” and felt obligated to tell us that the net after this adjustment was a net 84,000 jobs.


For some reason they even felt necessary to put this is a chart format. It appears someone was concerned that the Inspector General may have also been as skeptical as many of us were.


  • Its seasonal adjustments added over two million people to the non-farm payrolls number for the economy in both January 2022 and January 2023. Without these adjustments, only 152 million are working, as opposed to the 155 million the official number claimed.
  • Similarly, the household survey was adjusted to add over 1 million people to the “employed” category. So, in December of 2022, these one million people were NOT counted as employed. In January 2023 they were, NOT because they obtained jobs, but because the BLS’ model tweaked the number higher.
  • Part-time employment supposedly jumped by 627,000 in January 2023… despite the clear historical trend that part employment should DROP after the holidays.

The BLS also claims that only 5,000 tech workers lost their jobs in January. The real number of tech workers who lost jobs is minimally 85,000 which we will talk more about that number in a moment!


In case you think I am being some sort of conspiracy nut job you need to listen to this recent interview of long time Fed Governor Kevin Warsh . He specifically felt compelled to state that “No major corporation (like the Federal Reserve) would use data from the BLS or Commerce Department”. He mentions the Commerce Department because it was responsible for the Census Report used by the BLS.

I might add that it may be interesting to point out the Labor Secretary Marty Walsh unexpectantly and abruptly resigned less than two weeks after the Labor numbers were released. The BLS reports to Walsh who would have to sign-off on any changes made by the BLS or possible directions coming from the White House.

Walsh was the former Mayor of Boston and it was a shock when he was “plucked” for Biden’s Cabinet along with Governor Gina Raimondo from Rhode Island for Secretary of Commerce. These are two politicians with no exposure to the national stage. It is interesting that the Department of Commerce’s Census Survey was a key part of the changes to the BLS issued labor report.

Just thought some of you might be interested. As they say in Washington: “there may be conspiracies but there are no coincidences!”


I want to come back to that 85,000 tech job layoff number I mentioned a moment ago.


We have been rigorously using a developing database on global layoffs.

  • In 2022 this database tracked 1045tech companies with layoffs of 160,997
  • In 2023 this database lists 385tech companies with layoffs of already 108754

During this period of just over 1 year our current readout shows we are now tracking 1457 tech companies that total 251,392 layoffs.


This global database has expanded to more than just Tech companies. It is now showing us 2276 companies with 367, 072 layoffs.

I am not sure what is using  for their source but I found it interesting that they  sited with their January Labor release  reporting – and I quote their similar skepticism :  .. this at …“at a time when mass layoff news hits every 45 minutes”


I believe it is important to focus not on the actual number of layoffs but rather the layoffs as a total of a company’s total employee base.

In November because we believed this we first started detailing the numbers we started by showing percentages versus actual numbers.

15-25% cuts are now threatening to a company’s viability and sustainability!


The best way to illustrate why is to look at this comparison in the banking sector of total employment going into the 2008 Financial Crisis versus what we are about to experience today.

Banking populations like all major corporations have been dramatically paired back over the last decade as layers of middle management were taken out with advancements of reporting technologies and methods.

Generally, corporations have been cut to the bone. Layoffs today are taking out the “bone”. This means impairment to their ability to actually deliver product quality, deliveries, service and support.

I am sure this is evident to anyone who has had to phone a company, to only wait endlessly for someone to actually answer or find someone who could answer or resolve what may seem like a simple question.

I saw a sign awhile ago openly displayed in an office that said it succinctly but somewhat sarcastically:


“We are being asked to do more and more, with less and less. Soon we wil bel asked to do everything with nothing!”


As a telling example of what is underway, Goldman Sachs CEO David Solomon gathered his top executives in a closed-door meeting last week in Miami. The details of the meeting were leaked to Financial Times.

Apparently, Solomon acknowledged his plan to lay off thousands of employees should've been enacted sooner. I quote according to one person with direct knowledge of what was said at the closed event:

"As the environment was growing more complicated in Q2 of last year, every bone in my body believed we should be much more aggressive in slowing hiring and reducing headcount," 

Solomon said, Goldman fired 3,200 employees, or about 6.5% of its headcount last month. Many layoffs were in the investment bank's core trading and banking units. The firings were the largest in its operational history.

Notice Solomon went on a hiring spree in recent years. Since the end of 2018, the headcount at the investment bank has jumped 34% to more than 49,000. Now the firing cycle is underway.

Solomon acknowledged at the event that if he were to reduce headcount earlier, such as in early 2022, the number of employees fired would've been less drastic.

Goldman's net profits last year plunged nearly 50% from record earnings in 2021 due to lower investment banking fees, substantial markdowns at its asset management business, and losses in its financial technology segment.


We are seeing layoffs beginning everywhere from auto companies like Ford, to investment banks like Goldman, to technology companies - especially those who once had "disruptive" in their name. Tech giant Meta looks to be setting up to continue this trend.

That's because despite Meta already laying off 11,000 employees, it has ranked thousands of new employees "subpar" on their most recent performance reviews. This obviously sets these employees up for another wave of layoffs.

CEO and founder Mark Zuckerberg has already said that 2023 would be a "year of efficiency" for the company - signaling to Wall Street that such cuts would likely be forthcoming.

According to Fortune, managers at the company have given about 10% of its workers poor reviews, returning to a standard the company used to use prior to the pandemic, before Zuckerberg allowed leniency in performance reviews.

The news comes only days after the company said it would be delaying finalizing its budgets, with Zuckerberg writing in a Facebook post this month: “We’re working on flattening our org structure and removing some layers of middle management to make decisions faster, as well as deploying AI tools to help our engineers be more productive.

As part of this, we’re going to be more proactive about cutting projects that aren’t performing or may no longer be as crucial.”

Again I quote Zuckerman:  “We closed last year with some difficult layoffs and restructuring some teams. When we did this, I said clearly that this was the beginning of our focus on efficiency and not the end,” Zuckerberg concluded.


When Wayne Gretzky was asked why he was as great a hockey player as he was he responded: “I go where the puck is going to be – not where it is!”

It is the same with Investing. No the difference between leading concurrent and lagging indicators.

When it comes to credit and rates, the 2Y Treasury Note historically always leads the Fed (or as most know, Fed Rates follows the 2Y Note.  Bank Tightening then follows (where we are now), with loan delinquencies following (which has begun) with layoffs mounting - and then loan defaults occurring.

From a different perspective you might want to assess HOPE where slowing Housing leads, then New Orders from the ISM falls, then corporate profits begin collapsing with unemployment abruptly spiking!

Keep these sequences in front of you as you watch layoffs.


More and more the layoffs are not of blue color workers but white color workers. Though all are professionals the white collar, non-union workers have historically been given richer severance packages.


It is taking longer for these layoffs to show up in the labor number statistics since  they often collect pay for many months after. The longer the employment tenure is,  the larger the package and payout period.

As companies “cut into the bone” the delay can only be expected to be longer.


Janet Yellen is obviously oblivious to such basic realities! S he also appears to not appreciate that the unemployed 99’s from Covid-19 are only  now coming off their unemployment insurance and are therefore no longer counted as unemployed. They became members of the nearly 100M showing up in the plummeting Labor Force “Participation Rate”


What can we conclude?


Layoffs are coming as well as the ability to find a “Living Wage” job! Especially as inflation mounts and real disposable income only continues to fall.


Corporations faced with an inflation driven wage price spiral, slowing sales and margin pressures need a more encompassing answer than just layoff employees.

Employees levels are already thin and this is why I have been stressing that today it is more about the percentage of the total population corporations are laying off.


But that is still not the answer as they have long ago taken out "the fat" in their relentless job cuts and are now cutting into "the bone".

The concurrent problem CEO's are facing is that productivity is also plummeting! They are increasingly desperate to endorse almost any solution that will deliver cost reductions and improved productivity.


The problem with falling productivity is global. It means the move to advancing Robotics increasingly married to AI or Artificial Intelligence is on its way – and more rapidly than many yet expect!


The 10’s of millions of professional truck and car drivers (the biggest single employment sector in America) is soon going to relentlessly attacked.


As are many professional white collar sectors that has previously been protected from mass layoffs – programmers, writers, editors, illustrators and the list goes on as the use of Artificial Intelligence attacks the Information and Knowledge Worker!


It is coming, so pay attention with HOPE!


As I always remind you in these videos, remember politicians and Central Banks will print the money to solve any and all problems, until such time as no one will take the money or it is of no value.

That day is still in the future so take advantage of the opportunities as they currently exist.

Investing is always easier when you know with relative certainty how the powers to be will react. Your chances of success go up dramatically.

The powers to be are now effectively trapped by policies of fiat currencies, unsound money, political polarization and global policy paralysis.


I would like take a moment as a reminder

DO NO NOT TRADE FROM ANY OF THESE SLIDES - they are for educational and discussions purposes ONLY.

As negative as these comments often are, there has seldom been a better time for investing.  However, it requires careful analysis and not following what have traditionally been the true and tried approaches.

Do your reading and make sure you have a knowledgeable and well informed financial advisor.

So until we talk again, may 2023 turn out to be an outstanding investment year for you and your family.

I sincerely thank you for listening!