carpooling service provider
and tech and online retail giant
announced slowdowns in hiring in recent weeks. It’s about cutting costs, says an economist.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, said for industries such as restaurants and grocery stores, labor demand always outstrips supply. But for tech companies, the rising cost of doing business leaves them little choice about how to improve their profit margins, which Boockvar said investors are looking to see grow.
“For companies that are under fairly intense price pressure, they can only raise prices so much, and they will have to cut costs in some other way if they want to regain their lost profit margin, or at least try to maintain a profit margin that they had before Covid,” he said. “Labour is the biggest expense, so if you want to leverage a cost-influencing leverage, it’s your workforce.”
CNBC reported Monday that Uber (ticker: UBER) plans to slow hiring and cut spending in response to a “seismic shift” in the market. According to CNBC, Uber chief executive Dara Khosrowshahi emailed staff saying the company would ‘treat hiring as a privilege and be deliberate about when and where we add staff. “. He added that Uber “will be even more uncompromising on costs across the board.”
Amazon Chief Financial Officer Brian Olsavsky announced on the company’s earnings conference call that Amazon had too many employees after hiring more due to the emergence of the Omicron variant of Covid-19. 19.
“As the variant eased in the second half of the quarter and employees returned from furlough, we quickly went from being understaffed to being overstaffed, resulting in a drop in productivity. productivity added about $2 billion in costs over last year,” Olsavsky said. “We expect to reduce these cost headwinds in the second quarter.”
Meta said it would scale back plans to add employees, days after the release of second-quarter results. Meta CFO Dave Wehner said on a call with investors that “given the resulting headwinds, we have adjusted our plans for hiring and expense growth this year.”
While tech is experiencing a slowdown in hiring, there are currently no signs of it in the broader job market.
According to the US Bureau of Labor Statistics, total US non-farm payroll employment increased by 428,000 in April and the unemployment rate remained unchanged at 3.6%.
However, while the broader job market has yet to feel the effects of this trend, Boockvar said he expects to see a moderation in hiring going forward.
“I think the economy is heading for a more noticeable downturn,” Boockvar said. “We’re going to reach a point where most of the slowdown in hiring is because people want to contain their costs.”
Write to Angela Palumbo at [email protected]