“We are all scratching our heads”: the paradox of the American labor market

America’s largest newspaper publisher has a problem: it can’t find enough people to launch the editions on readers’ doors.

Gannett, who publishes more than 250 Abilene Reporter-News headlines at USA Today, is short of about 1,000 drivers to drop off the papers in the wee hours of the morning. About 12% of its delivery routes are now unmanned.

Yet, at the same time, Gannett told employees that “painful” staff cuts were happening as she tried to control costs at her declining printing operations.

The lag between job shortages and layoffs, even at a single company, illustrates the mixed messages emanating from the US labor market. A historic burst in hiring is being met with questions about whether some employers have been hiring too quickly.

As industries from trucking to fast food complain of labor shortages, companies as diverse as Coinbase, Goldman Sachs, Microsoft, Netflix, Robinhood, Shopify, Tesla, Twitter and Walmart have warned of job cuts in recent weeks.

The backdrop is an economy that added an unexpected 528,000 jobs in July, bringing unemployment down to a historic low of 3.5%, even after two quarters of declining gross domestic product.

“We’re all scratching our heads a bit,” admits Martine Ferland, chief executive of Mercer, which advises companies on labor and benefits issues.

“I’ve been in this industry for 25 years and I’ve never seen anything like it,” echoed Joanie Bily, chief labor analyst at EmployBridge, which places workers in manufacturing jobs, logistics and call center. “Even though we’re in a technical recession, it’s a really different kind of recession because the labor market is still strong,” she said.

For Andrew Challenger, sales manager for Challenger, Gray & Christmas, the anecdotal evidence of widespread job cuts is not supported by research from his staffing firm. Layoffs were above 2021 levels in June and July, but the number recorded in the seven months between January and July was the lowest for a comparable period since it began tracking such reductions in 1993.

US government job postings and labor turnover data only extend to June, but tell a similar story of layoffs still underway at historic lows in most industries.

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“We faced a very serious labor shortage at a time when companies were focused entirely on hiring and had no eye on layoffs. That being said, there are reasons to believe we could be at an inflection point,” Challenger said.

The recent cuts his company has tracked have been concentrated in a few sectors such as autos, construction and fintech.

Areas of finance that are sensitive to rising interest rates, such as mortgage lenders, have also been affected, Bily noted at EmployBridge: “Two years ago these jobs were in such demand and salaries were skyrocketing. for loan processors and closings. It stopped abruptly.

On Wall Street, too, the mood has shifted from windfall bonuses in 2021 to fears of layoffs in 2022 amid a sharp drop in investment banking fees. Many companies realized they had a surplus of bankers, after unprecedented levels of deals caused them to shed fewer low-ranked performers than usual.

Analysts attribute the suddenly slashed hiring plans of tech companies such as Etsy, Meta, Pinterest and Spotify to something else: lagging cost controls in a once-spend-free sector whose funding and valuations have fallen sharply. This year.

One change that has caught several industries off guard is the slowing rate of employee departures for better deals elsewhere.

The so-called quit rate remains well above pre-coronavirus pandemic levels in most industries, but Mercer’s Ferland said attrition has leveled off in recent months, making it more difficult for employers to estimate the number of people they will need to recruit to replace the departures.

Rob Sharps, managing director of T Rowe Price, cited this factor in the fund manager’s latest earnings announcement. A decline in voluntary attrition “means that headcount can increase significantly,” he observed, explaining why he had become more cautious about recruitment.

This caution led to a 5.4% drop in the number of job vacancies between May and June, although at 10.7 million the number of vacancies remains well above levels at the start of 2020.

“For the last year and a half, it’s just been blinders, trying to hire as many people as possible. No one could meet the demand they had, but I think it’s starting to level off,” Challenger said. Now, he said, customers are starting to think more strategically about who they need in their workforce after an “extremely unpredictable” time.

Meanwhile, he added, history suggests continued resilience in hiring may not be a good indicator of the outlook for the U.S. economy. “We know that employers are still hiring peddlers two or three months into a recession. . . It is a lagging indicator.

At Gannett, which advertises the opportunity to earn up to $600 a week delivering newspapers, shortages have started to ease a bit since June. But he sees several reasons why they will remain a problem.

“A lot of these delivery men [also] work from 9 a.m. to 5 p.m.,” noted Wayne Pelland, its senior vice president of publishing operations. As other companies raise salaries and provide more flexibility to fill entry-level positions, people are turning away from low-paying part-time jobs that require early starts and expensive gas bills.

As competition from employers with better salaries and career opportunities continues to deplete the pool of people interested in part-time delivery jobs, Pelland said, “we’re facing a perfect storm.”

Additional reporting by Caitlin Gilbert, Joshua Franklin and Lydia Tomkiw

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