Layoffs spread, but some employers can’t hire fast enough

Job cuts are on the rise at some of the largest US companies, but others are still struggling to hire workers, the result of a wild shift in consumer priorities since the Covid pandemic began three years ago.

The tech giant Meta, Amazon and Microsoftalong with companies ranging from Disney for Zoom, has announced job cuts in recent weeks. In total, US-based employers cut nearly 103,000 jobs in January, the most since September 2020, according to a report released earlier this month from outplacement firm Challenger, Gray & Christmas.

Meanwhile, employers added 517,000 jobs last month, nearly triple the number analysts had expected. This shows that the labor market is still tight, especially in the service sector that was affected before the pandemic, such as restaurants and hotels.

The dynamics make it more difficult to predict the path of the US economy. Consumer spending remained strong and surprised some economists, despite issues such as higher interest rates and persistent inflation.

It’s all part of the “strange legacy” of the Covid pandemic, said David Kelly, head of global strategy at JP Morgan Asset Management.

The Bureau of Labor Statistics is scheduled to release its next nonfarm payrolls on March 3.

Some analysts and economists warn that weakness in some sectors, pressure on household budgets, reduced savings and high interest rates could lead to weakness in work in other sectors, especially if wages are not in line with inflation.

Wages for workers in the leisure and hospitality industry rose to $20.78 an hour in January from $19.42 a year earlier, according to the latest data from the Bureau of Labor Statistics.

“There’s a difference between saying the labor market is tight and the labor market is strong,” Kelly said.

Many employers have faced challenges in attracting and retaining staff over the past few years, with challenges including childcare needs and competing workplaces that may have better schedules and salaries.

With interest rates rising and inflation remaining elevated, consumers may curtail spending and cause job losses or reduced hiring needs in thriving sectors.

“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 is, even if there are problems in some technology companies, which may reduce spending on business travel, or if job losses increase significantly, it may cause households to retreat quickly to spend on services and other goods.

Some of the new layoffs come from companies that have increased staff during the pandemic, while remote work and e-commerce are more important to consumer and company spending.

Amazon last month announced 18,000 job cuts at the company. The Seattle-based company employed 1.54 million people at the end of last year, nearly double the number at the end of 2019, before the pandemic, according to company filings.

Microsoft said it was 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 a growth sector at all costs, and it’s matured a little bit,” said Michael Gapen, head of U.S. economic research at Bank of America Global Research.

Other companies are still adding employees. Boeing, for example, planning to hire 10,000 people this year, many people in manufacturing and engineering. It will also eliminate about 2,000 companies, mostly in the human resources and finance departments, through layoffs and attrition. The growth is aimed at helping the aerospace giant ramp up its output of new planes to bounce back orders with big sales to airlines like United and Air India.

Aviation and aerospace companies were devastated early in the pandemic when travel dried up and are now playing catch-up. Airlines are still looking for pilots, a shortage that has limited capacity, while demand for experiences such as travel and dining is growing.

Chipotle planning to hire 15,000 workers as Gear up for the busy spring season and support expansion.

Businesses large and small must also raise wages to attract and retain workers. Industries that are not favored by consumers and other businesses, such as restaurants and aerospace, are building jobs after shedding jobs. Walmart said it will raise the minimum wage for store employees to $14 an hour to attract and employ workers.

The Miner’s Hotel in Butte, Montana, raised hourly wages for housekeepers by $1.50 to $12.50 for that position in the last six weeks because of the high turnover rate, Cassidy Smith, its general manager.

Airports and concessionaires have also raced to hire workers in the travel rebound. Phoenix Sky Harbor International Airport has held monthly job fairs and offers several child care scholarships to help with hiring.

Austin-Bergstrom International Airport, where seat bookings this quarter increased 48% from the same period in 2019, has launched several initiatives, such as a $1,000 referral bonus, and sign and retention incentives for referred staff.

The airport also raised the hourly wage for airport facilities representatives from $16.47 in 2022 to $20.68 in 2023.

“Austin has a high cost of living,” said Kevin Russell, the airport’s vice president of talent.

He said employee retention has been good.

Electricians, plumbers and heating and air conditioning technicians, in particular, are hard to keep because they can work elsewhere that aren’t 24/7 and with higher pay, he said.

Many new employees of the company must be trained, a time-consuming element for some industries to ramp back up, even if it has become easier to attract new employees.

“Hiring is no longer a constraint,” Boeing CEO Dave Calhoun said on an earnings call in January. “People can hire the people they need. It’s all about training and ultimately preparing them to do the sophisticated work they want.”

– CNBC’s Amelia Lucas contributed to this article.