A “Help Wanted” sign is displayed in the window of a Brooklyn, New York business.
Spencer Platt | fake images
Cracks are forming in the US job market as some companies seek to rein in hiring while others are desperate to find employees.
Microsoft, Twitter, Wayfair, Snap and Meta, parent of Facebook, recently announced that they plan to be more conservative when hiring new employees. Peloton and Netflix announced layoffs due to slowing demand for their products, and online car seller Carvana cut its workforce in the face of inflation and a slumping stock price.
“We will treat hiring as a privilege and be deliberate about when and where we add staff,” Uber boss Dara Khosrowshahi wrote to staff earlier this month, pledging to cut costs.
US-based employers reported more than 24,000 job cuts in April, up 14% from the previous month and 6% more than the same month last year, according to relocation firm Challenger, Gray & Christmas. .
But airlines, restaurants and others still need to fill positions. Job cuts during the first four months of the year were down 52% compared to the same period in 2021. Just under 80,000 job cuts were announced from January to April, the lowest count in nearly three decades since the company has been tracking the data.
What is emerging is the story of two labor markets, albeit not equal in size or pay. Hospitality and other service sectors are unable to hire enough workers to staff what is expected to be a boisterous summer rebound after two years of Covid hurdles. Tech and other big employers are warning they need to keep costs down and are putting employees on notice.
Registration of job offers
U.S. job openings soared to a seasonally adjusted 11.55 million at the end of March, according to the latest available report from the Labor Department, a record for data going back to 2000. The number of employees who quit their Jobs also hit a record, at more than 4.5 million. Contracts stood at 6.7 million.
Wages are increasing, but not enough to keep pace with inflation. And people are changing where they spend their money, especially as family budgets tighten thanks to the highest consumer price increases in four decades.
Economists, employers, job seekers, investors and consumers are looking for signs of the economy’s direction and are finding divisions emerging in the labor market. The divergence could mean a slowdown in wage growth, or in hiring itself, and could eventually reduce consumer spending, which has remained strong despite deteriorating consumer confidence.
Businesses from airlines to restaurants large and small still can’t hire fast enough, forcing them to cut growth plans. Demand rebounded faster than expected after those companies laid off workers during the pandemic-induced sales slump.
JetBlue Airways, Delta Air Lines, Southwest Airlines and Alaska Airlines have scaled back growth plans, at least in part, due to staffing shortages. JetBlue said pilot attrition is higher than normal and likely to continue.
“If your attrition rates are, say, 2x or 3x what you’ve seen historically, then you need to hire more pilots just to sit still,” JetBlue CEO Robin Hayes said at an investor conference on May 17.
Concessions at Denver International Airport, such as restaurants and retail, have made progress in hiring but are still 500 to 600 workers short of roughly 5,000, according to Pam Dechant, the airport’s senior vice president of concessions.
He said many cooks earn about $22 an hour, up from $15 before the pandemic. Airport employers are offering hiring, retention and, in at least one case, what she called a “bonus if she shows up for work every day this week.”
Consumers “spent a lot on goods and not a lot on services during the pandemic and now we see in our card data that it’s going back to services, literally flying by,” said David Tinsley, an economist and director at Bank of America. Institute.
“It’s a bit of a jolt from those people who maybe [had] exaggerated in terms of hiring,” he said of current trends.
The companies leading job growth are the ones that were hit the hardest early in the pandemic.
Jessica Jordan, managing partner of Rothman Food Group, is struggling to hire the workers she needs for two of her Southern California businesses, Katella Deli & Bakery and Manhattan Beach Creamery. She estimates that both are only 75% staffed.
But half of applicants never reply to their emails for an interview, and even new hires who have already submitted their paperwork often disappear before their first day, with no explanation, he said.
“I’m working really hard to hold their hand through every step of the process, just to make sure they get there on day one,” Jordan said.
Larger restaurant chains also have high hiring orders. The Subway sandwich chain, for example, said Thursday that it is looking to add more than 50,000 new workers this summer. Taco Bell and Inspire Brands, which owns Arby’s, said they are also looking to add staff.
Hotels and food services had the highest attrition rate of any industry in March, with 6.1% of workers leaving their jobs, according to the Bureau of Labor Statistics. The overall dropout rate was just 3% that month.
Some of those workers are moving away from the hotel industry altogether. Julia, a 19-year-old living in New York City, quit her restaurant job in February. She said that she left due to hostility from both clients and her bosses and that too many extra shifts were added to her schedule at the last minute. She now she works in child care.
“You have to work very hard to get fired in this economy,” said David Kelly, chief global strategist at JP Morgan Asset Management. “You have to be really incompetent and obnoxious.”
Slowdown in Silicon Valley
And if recovering industries are hiring to catch up, the reverse is equally true.
After a boom in hiring, several big tech companies have announced freezes and layoffs as concerns about an economic slowdown, the Covid-19 pandemic and the war in Ukraine put a damper on growth plans.
Richly financed startups are also not immune, even if they are not subject to the same level of market value degradation as public tech stocks. At least 107 tech companies have laid off employees since the start of the year, according to Layoffs.fyi, which tracks job cuts across the sector.
In some cases, companies like Facebook and Twitter are rescinding job offers after new hires have already accepted, leaving workers like Evan Watson in a precarious position.
Last month, Watson received a job offer to join Facebook’s emerging talent and diversity division, which she called one of her “dream companies.” He gave a notice at the real estate development firm where he worked and set a start date with the social media giant for May 9.
Just three days before that, Watson got a call about his new contract. Facebook had recently announced that it would pause hiring, and Watson anxiously speculated that he might be in for some bad news.
“When I got the call, my heart sank,” Watson said in an interview. Meta was freezing hiring and Watson’s addition was off.
“I was kind of silent. I really had no words to say,” Watson said. “So I was like, ‘Now what?’ I don’t work at my other company.”
The news disappointed Watson, but she said Facebook offered to pay her severance pay while she looked for a new job. Within a week, she landed a job at Microsoft as a talent scout. Watson said he “feels good” about landing at Microsoft, where the company “is much more stable, in terms of share price.”
For months, retail giant Amazon offered generous sign-on bonuses and free college tuition to entice workers. The company has hired 600,000 employees since the beginning of 2021, but is now overstaffed in its fulfillment network.
Many of the company’s recent hires are no longer needed, and e-commerce sales growth is cooling. In addition, employees who took sick leave amid a spike in Covid cases returned to work earlier than expected, Amazon Chief Financial Officer Brian Olsavsky said in a call with analysts last month.
“Now that demand has become more predictable, there are places in our network where we are slowing down or pausing hiring to better align with our operational needs,” Amazon spokeswoman Kelly Nantel told CNBC.
Amazon did not respond to questions about whether the company anticipates layoffs in the near future.
The reductions and hiring shifts are isolated for now, but they have some executives nervous.
“Any kind of news flow … when it comes to high-profile companies around job losses, it has the potential to undermine sentiment a little bit,” Bank of America’s Tinsley said, warning that the job market remains being strong. “Things are not as bad perhaps as the picture some might paint.”
However, he said the pace of service sector job growth will likely start to slow.
JPM’s Kelly said that even if the market lost 3 million openings, it would still be a market for job seekers.
“There is a strong excess demand for workers. It really shields the economy from recession,” he said.
But job cuts may affect other sectors.
A sharp rise in hiring freezes, job cuts, wage stagnation or even a pullback in company spending on things like employee benefits and a return to business travel could hurt the same service sectors that have prospered as covid cases dropped.
“The question is, ‘Will consumer spending keep your head above water?'” Tinsley said.
-CNBC jordan novet contributed to this story.