I’m back from my time off, and I’m only slightly sunburned but also rested. I’ll work through the stories from my time away with you, so neither of us will miss any highlights.
There’s a bit of a ride from last week. The jobs data indicates a significant slowdown in hiring, with June seeing 5.3 million hires, down 314,000 from May, marking the lowest hiring rate since March 2020. While layoffs remain low, the reduced appetite for new hires reflects a cooling economy, impacting workers’ confidence and job opportunities.
Everyone freaked out, as the S&P 500 fell 2.5% and Treasury yields fell. But as of this writing Monday morning, we’re back to the levels before I even went on vacation, so you know, there’s nothing to see here.
Despite recent discussions about a potential recession due to weak job reports and market volatility, key economic indicators suggest continued growth rather than contraction. The National Bureau of Economic Research indicates that while job growth has slowed, it remains positive, and personal income growth has been stable. Elevated recession talk may stem from the Sahm Rule, which links rising unemployment rates to recession onset, but historical patterns may not apply to the current unusual economic conditions. While caution is warranted, there is insufficient evidence to confirm that a recession has begun.
The 2024 InformationWeek US IT Salary Report highlights that despite economic growth and high consumer spending, IT professionals face job stress and layoffs. 56% are satisfied with their jobs, but 42% feel overworked. Generative AI is seen positively, with many companies hiring for AI-related roles, while concerns about fake job listings and ghosting during interviews persist.
CompTIA analysis shows that In July 2024, tech employment in the U.S. declined, with the sector losing approximately 9,162 jobs, reflecting a broader slowdown in hiring across the national labor market. While tech services and software development added about 4,000 jobs, telecommunications and cloud infrastructure losses offset these gains. The unemployment rate for tech occupations decreased slightly to 3.2%, contrasting with a national rate of 4.3%. Active job postings in tech exceeded 471,000, indicating ongoing hiring interest despite the slowdown.
The Q2 Service Leadership Data Report indicates a slowdown in managed service revenue growth to pre-Covid levels, while MSP profitability remains strong, with an average adjusted EBITDA of 14.1%. Private equity-backed MSPs outperformed others in revenue growth, achieving 18.7% adjusted EBITDA. Additionally, fewer MSPs reported losses, and VARs experienced a 3.5% revenue growth after previous declines, although project/professional services revenue for VARs fell by 4.3%.
Why do we care?
Wall Street is a bunch of nervous nellies, and day-to-day, ignore their reactions. And remember, dips are both natural and sometimes good. They’re buying opportunities if you’re younger or looking to enter a market, and disruption is good for smaller players. Some volatility is a positive thing, and savvy operators remember that.
The insight is to look for longer-term recommendations from economists as a better guide.
Broad economy, growing. The MSP market is still growing. Sure, slowing, and let’s acknowledge that. But not anything panic-worthy.