- Layoffs have recently expanded beyond tech giants like Microsoft and Amazon.
- Service businesses such as hospitality and restaurants have hired people to rebuild after the pandemic.
- The Fed is closely monitoring job and wage growth to curb inflation.
A for rent sign hangs on the window of a Chipotle restaurant in New York, April 29, 2022.
Shannon Stapleton | Reuters
Job losses are mounting at some of America’s largest companies, but others are still struggling to hire, the result of wild swings in consumer priorities since the Covid pandemic began three years ago.
Tech giants Meta, Amazon and Microsoft, along with companies ranging from Disney to Zoom, have announced job cuts in recent weeks. Overall, U.S.-based employers cut nearly 103,000 jobs in January, the highest number since September 2020, according to a report released earlier this month by outplacement firm Challenger, Gray & Christmas.
Meanwhile, 517,000 jobs were added last month, almost three times as many as analysts had expected. This points to a still tight labor market, particularly in service sectors that were hit hard earlier during the pandemic, such as restaurants and hotels.
The dynamics make it even more difficult to predict the path of the US economy. Consumer spending has remained robust, surprising some economists, despite headwinds such as higher interest rates and continued inflation.
It’s all part of the Covid pandemic’s “legacy of strangeness,” said David Kelly, chief global strategist at JP Morgan Asset Management.
The Bureau of Labor Statistics is scheduled to release its next nonfarm payroll on March 3.
Some analysts and economists warn that weakness in some sectors, pressure on household budgets, a drop in savings and high interest rates could spread job weakness in other sectors, especially if wages fail to keep pace with inflation.
Wages for leisure and hospitality workers rose from $19.42 a year earlier to $20.78 an hour in January, according to the latest data from the Bureau of Labor Statistics.
“There’s a difference between saying the job market is tight and saying the job market is strong,” Kelly said.
Many employers have faced challenges in attracting and retaining staff in recent years, with challenges such as employee childcare needs and competitive workplaces that may have better schedules and rewards.
With interest rates rising and inflation remaining high, consumers could cut spending and cause job losses or reduce hiring needs in otherwise thriving industries.
“When you lose a job, you don’t just lose a job — there’s a multiplier effect,” said Aneta Markowska, chief economist at Jefferies.
That means that while there are problems at some tech companies, that could translate into lower spending on business travel, or if job losses increase significantly, it could lead to households falling back heavily on spending on services and other goods.
Some of the recent layoffs have come from companies that have bolstered workforces over the course of the pandemic, when remote working and e-commerce have become more central to consumer and business spending.
Amazon announced 18,000 job cuts across the company last month. The Seattle-based company employed 1.54 million people at the end of last year, nearly double its number at the end of 2019, just before the pandemic, according to the company’s documents.
Microsoft said it is cutting 10,000 jobs, about 5% of its workforce. The software giant had 221,000 employees at the end of June last year, up from 144,000 before the pandemic.
Tech “used to be an industry of growing at any cost, and it’s maturing a bit,” said Michael Gapen, head of US economic research at Bank of America Global Research.
Other companies are still adding staff. For example, Boeing plans to hire 10,000 people this year, much of it in manufacturing and engineering. It will also cut about 2,000 corporate jobs, mainly in human resources and finance departments, through layoffs and attrition. The growth is meant to help the aerospace giant ramp up production of new aircraft ahead of a pick-up in orders with big sales to airlines like United and Air India.
Aerospace companies were devastated at the start of the pandemic as travel dried up and are now catching up. Airlines are still looking for pilots, a shortage that has limited capacity, while demand for experiences such as travel and dining has skyrocketed.
Chipotle plans to hire 15,000 employees to prepare for a busier spring season and support expansion.
Businesses large and small are also finding they need to raise wages to attract and retain employees. Industries that fell out of favor with consumers and other businesses, such as restaurants and aerospace, are rebuilding workforces after shedding workers. Walmart said the minimum wage for store workers would be raised to $14 an hour to attract and retain workers.
The Miner’s Hotel in Butte, Montana, increased hourly wages for housekeepers by $1.50 to $12.50 for that position over the past six weeks due to high turnover, Cassidy Smith, its general manager.
Airports and concessionaires have also raced to hire workers in the travel rebound. Phoenix Sky Harbor International Airport holds monthly job fairs and offers a number of childcare grants for the staff to help with hiring.
Austin-Bergstrom International Airport, where schedule per seat grew 48% this quarter over the same period of 2019, has launched a number of initiatives, such as $1,000 referral bonuses and signing and retention incentives for referred staff.
The airport also increased the hourly wage for airport facility representatives from $16.47 in 2022 to $20.68 in 2023.
“Austin has a high cost of living,” said Kevin Russell, the airport’s deputy chief of talent.
He said employee retention has improved.
However, electricians, plumbers and heating and air conditioning technicians in particular are difficult to retain because they can work in other places that cannot work 24/7 and for higher wages, he said.
Many companies’ new employees require training, a time-consuming element for some industries to get going again, even though it has become easier to attract new employees.
“Hiring is no longer a constraint,” Boeing CEO Dave Calhoun said during an earnings call in January. “People can hire the people they need. It’s all about the training and ultimately getting them ready for the advanced work we demand.”
— CNBCs Amelia Lucas contributed to this article.