There is a help wanted sign in the window of a Brooklyn, New York business.
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Cracks are emerging in the U.S. job market as some companies seek to curtail hiring while others are desperate for workers.
Microsoft, Twitter, Wayfair, Snap and Facebook parent Meta recently announced their intention to be more conservative when adding new employees. Peloton and Netflix announced layoffs as demand for their products slowed, and online car salesman Carvana has cut its workforce as it faces inflation and a rising stock price.
“We will consider hiring as a privilege and make informed decisions about when and where to add staff,” Uber chief Dara Khosrowshahi wrote to staff earlier this month, pledging to cut costs.
According to outplacement agency Challenger, Gray & Christmas, U.S. employers reported more than 24,000 job losses in April, up 14% from the previous month and 6% more than the same month last year.
But airlines, restaurants and others have yet to fill vacancies. The number of job losses in the first four months of the year was 52% lower than in the same period of 2021. Just under 80,000 job losses were announced from January to April, the lowest number in the company’s nearly three decades of tracking.
What ensues is a story of two job markets – albeit not equal in size or salary. The hospitality and other service industries are unable to hire enough workers to staff what is expected to be a buoyant summer recovery after two years of Covid obstacles. Tech and other major employers warn to keep costs down and notify employees.
According to the latest available report from the Labor Department, U.S. job openings rose to 11.55 million seasonally in late March, a record for data dating back to 2000. The number of workers leaving their jobs also hit a record high, at just over 4.5 million. Rents amounted to 6.7 million.
Wages are rising, but not enough to keep up with inflation. And people are changing where they spend their money, especially as household budgets tighten thanks to the highest rise in consumer prices in four decades.
Economists, employers, job seekers, investors and consumers are looking for signals about the direction of the economy and finding emerging splits in the job market. The divergence could mean a slowdown in wage growth, or hiring, and could ultimately lead to a restraint in consumer spending, which has remained robust despite deteriorating consumer confidence.
Companies, from airlines to restaurants, large and small, still can’t hire people fast enough, forcing them to scrap their growth plans. Demand shrunk faster than expected after those companies laid off workers amid the pandemic-driven drop in sales.
JetBlue Airways, Delta Air Lines, Southwest Airlines and Alaska Airlines have scaled back growth plans, at least in part because of staff shortages. JetBlue said pilot turnover is higher than normal and likely to continue.
“For example, if your failure rates are 2x to 3x what you’ve seen in the past, then you need to hire more pilots to stand still,” JetBlue CEO Robin Hayes said at an investor conference on May 17.
Denver International Airport’s concessions, such as restaurants and retail, have made strides in hiring but are still understaffed by about 500 to 600 employees to reach about 5,000, according to Pam Dechant, senior vice president of concessions for the airport.
She said many cooks earn about $22 an hour, compared to $15 before the pandemic. Airport employers offer hiring, retention and, in at least one case, what she called an “if you show up at work every day this week.”
Consumers “spent a lot on goods during the pandemic and not much on services and now in our card data we see them flying back to services, literally flying,” said David Tinsley, an economist and director at the Bank of America Institute.
“It’s a bit of a shakeout from those people who might… [had] exaggerated in terms of hiring,” he said of current trends.
The companies leading the job growth are the ones that were hit hardest at the start of the pandemic.
Jessica Jordan, managing partner of the Rothman Food Group, struggles to hire the workers she needs for two of her Southern California businesses, Katella Deli & Bakery and Manhattan Beach Creamery. She estimates that both are only about 75% staffed.
But half of job applicants never answer their interview emails, and even new hires who have already submitted their paperwork often disappear before their first day, without explanation, she said.
“I work so hard to hold their hand every step of the way, just to make sure they get in that first day,” Jordan said.
Larger restaurant chains also have high recruiting rates. Sandwich chain Subway, for example, said Thursday it plans to add more than 50,000 new employees this summer. Taco Bell and Inspire Brands, owner of Arby’s, also said they were looking for staff.
According to the Bureau of Labor Statistics, hotels and food services had the highest unemployment rate of all industries in March, with 6.1% of workers leaving their jobs. The overall quit rate that month was just 3%.
Some of those employees are leaving the hospitality industry completely. Julia, a 19-year-old living in New York City, quit her restaurant job in February. She said she left due to hostility from both clients and her bosses and too many extra shifts being added to her schedule at the last minute. She now works in childcare.
“You have to work really hard to get laid off in this economy,” said David Kelly, chief global strategist at JP Morgan Asset Management. “You must be really incompetent and obnoxious.”
Delay in Silicon Valley
And when booming industries hire people to catch up, the reverse is also true.
Following a recruitment boom, several major tech companies have announced hiring freezes and layoffs as concerns about an economic slowdown, the Covid-19 pandemic and the war in Ukraine curtail growth plans.
Richly funded start-ups are also not immune, even if they are not subject to the same level of market value degradation as public technology stocks. According to Layoffs.fyi, which tracks industry job losses, at least 107 tech companies have laid off workers since the beginning of the year.
In some cases, companies like Facebook and Twitter are withdrawing job openings after new hires have already been hired, leaving employees like Evan Watson in a precarious position.
Last month, Watson was offered a job to join Facebook’s emerging talent and diversity division, which he called one of his “dream companies.” He gave notice of termination to the real estate development company where he worked and set a start date with the social media giant for May 9.
Just three days earlier, Watson received a call about his new contract. Facebook had recently announced it would stop hiring, and Watson feared he would receive some bad news.
“When I got the call, my heart dropped,” Watson said in an interview. Meta froze hiring and Watson’s onboarding was off.
“I was just quiet. I didn’t really have words to say,” Watson said. “Then I thought, ‘Now what?’ I don’t work at my other company.”
The news left Watson disappointed, but he said Facebook offered to pay him severance pay while he was looking for a new job. Within a week, he landed a job at Microsoft as a talent scout. Watson said he “feels good” about landing at Microsoft, where the company is “a lot more stable in terms of stock price.”
For months, retail giant Amazon dangled generous sign-up bonuses and free tuition to lure employees. The company has hired 600,000 employees since early 2021, but is now overstaffed in its fulfillment network.
Many of the company’s recent hires are no longer necessary as e-commerce sales growth cools. In addition, workers taking sick leave amid a spate of Covid cases went back to work earlier than expected, Amazon CFO Brian Olsavsky said during a conversation with analysts last month.
“As demand has become more predictable, there are sites in our network where we slow or pause hiring to better align with our operational needs,” Amazon spokesperson Kelly Nantel told CNBC.
Amazon has not responded to questions about whether the company expects layoffs in the near future.
The discounts and hiring services are isolated for now, but they have some executives on edge.
“Any kind of news flow…when high-profile job loss companies have the potential to dampen sentiment a little bit,” Bank of America’s Tinsley said, warning that the job market is still strong. “Things may not be as bad as the picture some might paint.”
However, he said the pace of job growth in the service sector is likely to slow.
JPM’s Kelly said that even if the market lost 3 million job openings, it would still be a market for job seekers.
“There is a strong demand for labor. It really protects the economy from a recession,” he said.
But job losses can also affect other sectors.
A sharp increase in layoffs, job losses, wage stagnation or even a drop in corporate spending on things like employee benefits and a return to business travel could actually hurt the service sectors that have thrived as Covid cases plummeted.
“The question is, ‘Will consumer spending survive?'” Tinsley said.
— CNBCs Jordan Novet contributed to this story.