• 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.

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?