Here is some stuff I know, the “Is this a big deal or isn’t it?” edition:
▪ Another week, another flurry of news, rumor and conjecture concerning that great big company in Seattle.
“Amazon plans to launch its own delivery service to compete with FedEx and UPS … Amazon wants to get bigger in supplying hospitals … Amazon is cutting 500 jobs … Amazon is expanding its in-house chip-design efforts …”
Hey, wait a minute. Back up to that third item. What’s that all about?
The news of layoffs within the company (Amazon says those affected have been offered positions within it) prompted a wide range of responses, from panic (“This is the end, the Amazon bubble is about to deflate and take the local economy with it.”) to celebratory (“This the end, and good riddance to a company that has wrecked Seattle.”) to dismissive (“Companies readjust all the time.”) to questioning (“Why would they do this when they’re looking for a whole new second headquarters?”).
It’s worth noting that the 500 or so cuts are not a net reduction in employment. The company reported worldwide employment (excluding temps and contractors) of 566,000 in the fourth quarter of 2017, up from 541,900 in the third quarter. Various online job-search services list more than a thousand Amazon job postings just in the Seattle area.
It also should be acknowledged that big diversified companies often are simultaneously hiring and laying off, to catch up with growth opportunities in one line of business while coping with reduced demand and over-staffing in another. That would be especially true for a company like Amazon, notorious for constantly trying new lines of business and, on occasion, shedding ventures and projects it decides aren’t going to deliver as hoped.
Investors, employees, politicians, critics and competitors have been looking for the moment of peak Amazon, which is defined not just by revenue, employee count or stock price but by market dominance, acquisition activity and expansion into new lines of business. Peak Amazon will be that point at which it can’t or won’t grow any more and settles into comfortable maturity or even does some pruning.
That wouldn’t be a new phenomenon even for this region. Back in the ‘90s, it was Microsoft that was destined to rule the world. Between competition, antitrust regulatory efforts and a few missed bets on emerging technology, Microsoft became one of a handful of tech giants, albeit still successful.
Amazon could well reach that point, too, whether because of the decisions it makes or decisions made about it. That point, however, is not this week.
▪ Speaking of vigils for peaks and turning points:
“The stock market is crashing, we’re headed for a recession and … oh wait, it’s back up, never mind, what’s up with the Seahawks and … uh oh, it’s back down, the bubble is burst and … phew, back up, it was just a blip and …”
The volatility of the market the last two weeks has been of huge concern to those who watch such things and read the results for indicators of the economy’s direction. The big question is whether those gyrations indicate an end to the current round of economic growth (answers: Yes, no, maybe, who knows).
The bigger question, though, is whether many people in the world outside those financial circles pay much attention these days to what the stock market might or might not be telling us.
The lack of general interest in how or what the market is doing is partly a residual of the financial crisis leading up to the Great Recession, and it wasn’t just because of the losses Americans sustained in employment and decimated savings and retirement portfolios. Far from signaling the economy’s future, the markets seemed to be a step behind what was going on in industries like housing finance. There’s been a huge loss of confidence in the markets’ supposed ability to identify and price risks in the system.
But it’s more than that.
Americans don’t see much connection between the market’s ups and downs and the long-term issues and trends that directly affect their lives: The geographic and educational mismatch between where people live and the skills they have, and the places job growth is happening and the skills needed for those jobs. The ability of American employers to compete globally, or even in the United States against lower-cost competitors. The prospect of technology wiping out entire categories of jobs. Rising costs for housing, health care, energy.
A sustained bear market would hurt and would be noticed by some. A sustained recession, or a long-term structural shift in the economy, would hurt more and affect more. Americans aren’t shrugging off the former, but they’re also not counting on it to tell them much about what’s coming, and when.
Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at firstname.lastname@example.org.