Meta Platforms, ride-share service provider
Uber Technologies and tech and online retail giant
Amazon.com have announced hiring slowdowns in recent weeks. It’s all about keeping down costs, according to one economist.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, said for industries such as restaurants and grocery stores, the demand for labor still exceeds supply. But for tech companies, the rising cost of doing business leaves them with few choices on how to improve their profit margins, which Boockvar said investors are looking to see grow.
“For companies experiencing pretty intense price pressures, there’s only so much they can raise prices, and they’re going to have to cut costs in other ways if they want to regain their lost profit margin, or at least try to retain some profit margin that they had pre-Covid,” he said. “Labor is the biggest expense, so if you want to pull a lever that has influence on the cost side, it is your labor.”
CNBC reported Monday that Uber (ticker: UBER) plans to slow down hiring and cut back spending in response to a “seismic shift” in the market. According to CNBC, Uber Chief Executive Officer Dara Khosrowshahi sent an email to staff that said the company would treat “hiring as a privilege and be deliberate about when and where we add headcount. He added that Uber “will be even more hardcore about costs across the board.”
Amazon Chief Financial Officer Brian Olsavsky announced on the company’s earnings conference call that Amazon has too many workers after hiring more due to the emergence of the Omicron variant of Covid-19.
“As the variant subsided in the second half of the quarter and employees returned from leave, we quickly transitioned from being understaffed to being overstaffed, resulting in lower productivity. This lower productivity added approximately $2 billion in costs compared to last year,” Olsavsky said. “We expect to reduce these cost headwinds in Q2.”
Meta said it would scale back plans for adding employees, a few days after posting second-quarter earnings. Meta Chief Financial Officer Dave Wehner said in a call with investors that “given the resulting revenue headwinds, we have adjusted our plans for hiring and expense growth this year.”
While tech undergoes a hiring slowdown, there currently aren’t signs of one in the larger jobs market.
According to the U.S. Bureau of Labor Statistics, total nonfarm payroll employment in the U.S. increased by 428,000 in April, and the unemployment rate was unchanged at 3.6%.
However, even though the greater jobs market has yet to feel the effects of this trend, Boockvar said he expects to see a moderation in hiring moving forward.
“I do think that the economy is headed for a more notable slowdown,” Boockvar said. “We’re gonna reach a point where most of the slowdown in hiring is because of people wanting to keep a lid on their costs.”
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