Update: Today's Fed meeting impact on tech jobs

Macro factors matter for tech hiring

The US Federal Reserve (Fed) didn't cut rates today, but macro effects impact the tech job market more than almost anything else.

Here are 3 macro impacts on tech jobs
plus 5 types of affected companies with examples

1. Interest rates & inflation

Fed interest rate hikes combatting inflation made raising capital expensive and led to declining valuations for tech companies and less ability to fund growth through hiring. Most people know this.

2. New tax laws

The Tax Cuts and Jobs Act regulation that went into effect for 2022 made employers take a bigger tax burden upfront.

They are not able to deduct software development salaries from taxes all at once, but having to spread it over 5 years.

This decreased their bottom lines overnight with higher tax burdens.

Less money is then available to pay for employees.

These laws might get overturned depending on the political climate, but I would not hold my breath on the government giving back tax revenues to tech companies soon.

3. The broader economy and job market

We are seeing early signals of a broader job market recession right now.

The Fed said they still plan to cut rates 3 times this year, but inflation isn't under full control and there are positive economic signals outside of poor household jobs surveys and more people taking on part time instead of full time work.

Anyone looking for a job today even outside tech knows that there is a tough job market out there.

If this becomes a job market recession...
1/ salaries will dip
2/ consumer demand for goods will drop as they have less disposable income,
3/ revenues at tech companies will get hit

A recession for all is a recession for tech, even if the stocks won't get hammered as badly as the hiring market.

(read below for 5 types of affected companies with examples)

Listen or read more about the tech job market and some tips as a candidate in my latest deep dive:

5 types of company affected by the interest rates

⚖️ 1. Highly Leveraged Tech Companies

These are companies that carry a high level of debt relative to their equity. They might have leveraged extensively to fund acquisitions, research and development, or expansion efforts.

Impact of Interest Rates: Higher interest rates can increase the cost of servicing debt, which can significantly impact their bottom line. Conversely, lower rates can reduce these costs and improve profitability.

Netflix, Uber, Tesla

📈 2. Tech Startups and High-Growth Companies

Startups and companies focused on rapid growth often rely on external financing to fuel their expansion. These companies might not yet be profitable and could be in early stages of developing and marketing their products.

Impact of Interest Rates: Rising interest rates can make it more expensive for these companies to borrow money, potentially slowing down their growth. Additionally, as interest rates increase, investors may shift their preferences towards safer investments, making it harder for high-growth tech companies to raise funds.

Snowflake, DoorDash, Roku

💳 3. Companies Dependent on Consumer Financing

Some tech companies, particularly those selling high-priced products (like electric vehicles or expensive consumer electronics), offer financing options to their customers. These companies' sales can be sensitive to the availability and cost of consumer credit.

Impact of Interest Rates: Higher interest rates can lead to more expensive consumer financing terms, potentially reducing demand for these companies' products. Lower rates can have the opposite effect, making financing more attractive and boosting sales.

Shopify, Apple, Tesla, Peloton Interactive

🏚️ 4. Real Estate and Construction Tech Companies

Companies that provide technologies and services to the real estate and construction industries, including online real estate platforms, construction management software, and smart home technology providers.

Impact of Interest Rates: The demand for these companies' products and services can be indirectly affected by interest rates through their impact on the real estate and construction markets. Higher rates can slow down real estate transactions and new construction projects, affecting demand for tech solutions in these sectors.

Zillow Redfin Procore Technologies

🏦 5. Financial Technology (Fintech) Companies

Fintech companies, especially those offering lending services, savings products, or investment platforms, can be directly impacted by interest rate changes.

Impact of Interest Rates: For fintech lenders, higher rates can increase the cost of capital and reduce the margin on loans. For savings and investment platforms, the interest rate environment can influence the attractiveness of the products they offer to consumers.

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