A strong crisis comes when US long-term and short-term interest rates are reversed … Amazon and Apple stop hiring

The reason why the market is paying attention to the reversal of long-term and short-term US Treasury yields is that the economic crisis occurred after a major historical reversal occurred. More closely, it was the global financial crisis of 2008 and the bursting of the dot-com bubble of the 2000s. In the 1980s, before the global recession caused by the oil shock and the collapse of the Japanese real estate market, there was a large reversal of short and long term interest rates.

According to Bloomberg on the 4th, this is the first time in 40 years that the yield on the two-year US Treasury bond is 57bp (1bp = 0.01 percentage point) higher than the yield on the 10-year bond. This is the biggest gap since the early 1980s, when the oil crisis caused a serious economic crisis. In December 2006, just before the financial crisis that started in the US in 2007, the difference between the two-year and 10-year US yields was 11bp. In March 2000, just before the dot-com bubble, it was 41bps. The immediate cause is the intense austerity policy of the United States Federal Reserve (Fed).

The Wall Street Journal (WSJ) said on the same day that “the biggest long-term and short-term interest rate reversal since the 1980s predicts an economic downturn,” and “eventually, this will cause the Fed to cut rates.” ” Priya Misra, head of global interest rate strategy at TD Securities, warned that the yield curve will continue to invert as the Fed continues to raise rates and is likely to endure an economic slowdown. UBS, which previously viewed the possibility of a Fed pace adjustment as low, predicted that “the Fed, along with other major central banks, will continue to tighten interest rates until the first quarter of next year.” According to Bloomberg, the average probability of a recession in the United States within 12 months, surveyed by 52 major global investment and economic research institutions, has risen to 60%. It rose 6 times in 10 months from the 10% range in January. Two of these organizations predicted a 100% probability of recession.

As fears of a recession grow, America’s big tech companies are taking preemptive steps to lay off and freeze jobs.

Amazon, the world’s largest e-commerce company, informed its employees on the 3rd (local time) of a company-wide job freeze following the retail sector, saying it would “temporarily suspend future employment.” “The economic outlook is deteriorating,” Amazon’s head of human resources, Beth Galletti, said in a statement.

Apple, the largest market capitalist in the United States, has also announced that almost all additional employment will cease. According to Business Insider, Apple is likely to hire additional store sales staff, but has decided not to hire anything else. “The layoff will affect the company’s full-time employees,” Business Insider said. Another Apple official said, “The employment suspension could last until September of next year.”

Ride-sharing companies, which are smaller than big tech companies, are in the process of being put out of business. Lyft notified its employees on the same day that it would cut 13% of its workforce. Currently, Lyft employs about 5,000 people. It is the same as firing 700 people this time, following the previous firing of 60 people. In response, co-founders John Zimmer and Logan Green said in a memo to employees that “a recession is likely next year, and ride-sharing insurance costs are rising.” They are asking to break up with them,” he explained.

PayPal’s competitor Stripe, an online payment service, is also laying off 14% of its workers. Stripe was recognized for its corporate value of more than 100 trillion won last year. It will lay off 1,100 of its 8,000 employees, CNBC reported. Twitter, bought by Elon Musk, is in the process of cutting back. According to the Financial Times (FT) of the UK, “the target of redundancies could be close to half of the total of 7,000 workers.”

Silicon Valley is being restructured. Previously, Microsoft, Tesla, and Coinbase had already suspended or laid off employees. The CEO of a startup in Silicon Valley said, “When we meet with venture capitalists, they first ask about restructuring. The cold wave of job cuts is spreading all the way to Wall Street. Reuters said Morgan Stanley is expected to begin the layoff process in the coming weeks. The FT assessed that “the era of poverty has arrived”.

[진영태 기자·실리콘밸리/이상덕 특파원]