driving sharing service provider
and technology and online retail giant
they announced a slowdown in employment in recent weeks. It’s all about reducing costs, says one economist.
Peter Boockvar, chief investment officer at Bleakley Advisory Group, said that for industries such as restaurants and grocery stores, labor demand still exceeds supply. But for technology companies, rising operating costs leave them little choice as to how to improve their profit margins, which Boockvar said investors want to see growth.
“For companies experiencing pretty intense price pressures, there’s only so much they can raise prices and they’ll have to cut costs in other ways if they want to regain their lost profit margin or at least try to keep some profit margin that they had pre-Covid,” he said. . “Labor is the biggest expense, so if you want to pull the lever that affects price, it’s your labor.”
CNBC reported on Monday that Uber (label: UBER) plans to slow employment and reduce consumption in response to “seismic change” in the market. According to CNBC, Uber CEO Dara Khosrowshahi sent an e-mail to staff saying the company would treat “employment as a privilege and think carefully about when and where to add staff. He added that Uber “will be even more stubborn about costs in full”.
Amazon chief financial officer Brian Olsavsky announced at the company’s 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 waned in the second half of the quarter and employees returned from leave, we quickly moved from staff shortages to overstaffing, resulting in lower productivity. This lower productivity has increased costs by approximately $ 2 billion compared to last year, ”Olsavsky said. “We expect to reduce these inconvenient costs in the second quarter.”
Meta said it would cut plans to add employees, a few days after earnings are announced in the second quarter. Meta Chief Financial Officer Dave Wehner said in an interview with investors that “given the resulting revenue barriers, we have adjusted our plans for employment and spending growth this year.”
Although technology is slowing employment, there are currently no signs of a larger labor market.
According to the U.S. Bureau of Labor Statistics, total non-agricultural wage employment in the U.S. rose 428,000 in April, while the unemployment rate remained unchanged at 3.6%.
However, although the larger labor market has yet to feel the effects of this trend, Boockvar said he expects moderation to thrive in employment.
“I think the economy is going to slow down significantly,” Boockvar said. “We’re going to get to the point where most of the slowdown is because people want to keep the cover on their expenses.”
Write to Angela Palumbo at [email protected]