Meta Platform’s Facebook (ticker: FB), ride-sharing service company Uber Technologies (ticker: UBER) and online retail giant Amazon.com have all announced a slowdown in their hiring in recent weeks. According to one economist, the apparent reason has been the need to cut down costs.
According to Peter Boockvar, Chief Investment Officer at Bleakley Advisory Group, industries such as restaurants and grocery stores still demand labour that exceeds supply. However, for technology companies, the rising costs of doing business leaves them with few choices on how to raise their profit margins, which Boockvar says investors are keen to 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. “Labour is the biggest expense, so if you want to pull a lever that has an influence on the cost side, it is your labour.”
According to reports, Uber plans to respond to a “seismic shift” in the market by slowing downing its hiring and cutting back spending in the market. According to CNBC, Uber Chief Executive Officer Dara Khosrowshahi sent out an email to the entire company saying that 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.”
During Amazon’s earnings call, the company’s Chief Financial Officer, Brian Olsavksy, announced that the company has too many workers after hiring more during the pandemic-fueled demand rush.
“As the variant effects subsided in the second half of the quarter and employees returned from leave, we quickly transitioned from understaffed to overstaffed, resulting in lower productivity. This lower productivity added approximately $2 billion in costs compared to the previous year,” said Olsavsky. “We expect to reduce these cost hurdles in the second quarter.”
Meta also announced its plans to scale back from adding extra employees only a few days after posting its second-quarter earnings. In a call to investors, Meta Chief Financial Officer said, “given the resulting revenue hurdles, we have adjusted our hiring and expense growth plans this year.”
As the tech industry undergoes a hiring slowdown, there aren’t signs of one in the larger jobs market. According to a report released by the U.S Bureau of Labour Statistics, total nonfarm payroll employment in the U.S increased by roughly 428,000 in April. The unemployment rate remained unchanged at 3.6%.
Despite the fact that the larger job market is yet to reflect the sentiment, 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.”