The important point to highlight is not that we made a good call — people in the market make good calls every day — but that we did it using a new form of data.
Predicting a job layoff announcement looking at job posting trends is entirely new, at least we have not seen a similar type of analysis. It leverages the open web, publicly available information, and of course common sense.
The logic backing this type of analysis is very intuitive and easy to understand. Struggling companies, those likely to layoff a portion of their workforce, will tend to decrease hiring prior to the announcement of layoffs. Company management understands that there is a problem with the outlook of the company and begins to adjust well before the official decision, let alone announcement, of layoffs.
Microsoft’s trend in job postings has been on a clear downward trend for the last year. In the face of a strong job market such a downward trend is a red flag. Additionally, within 24 hours of the company’s new CEO stressing “change”, its job postings declined dramatically — with the largest one day drop of the previous 12 months.
The actual announcement was aggressive, stating that company plans include “the elimination of up to 18,000 positions over the next year”. Such layoffs amount to the largest in the company’s history. We would expect to see signals prior to the announcement in the trend in job postings, and this is exactly what happened.
Monitoring job postings on a company-specific level will most likely become an integral part of fundamental company analysis. It is useful in providing insights into a company’s health, its growth prospects, and the timing of change of its strategy, among other things.