The confusing job marketplace: Tech and finance are braced for the worst, and travel can’t get enough

Companies that were most aggressive in hiring during the pandemic are now understaffed and have to reduce or impose hiring freezes.

In the meantime, hospitality and airlines are trying desperately to hire staff after Covid-19 lockdowns caused them to reduce their workforce.

Julia Pollak, chief economist at ZipRecruiter, said that the pandemic caused unique and once-in-a lifetime conditions in many industries, which resulted in a dramatic redistribution of capital.

Passengers waiting at the American Airlines gate at Dallas/Fort Worth International Airport in Dallas.

In order to cope with the pandemic surge, Amazon, Shopify, and Peloton doubled staffs. Morgan Stanley staffed up to handle record-breaking IPOs. Mortgage lenders increased headcount due to rock-bottom interest rates.

On one side, Delta Air Lines and Hilton Worldwide saw their headcount drop due to lockdowns that struck large parts of the country.

They’re trying to reverse the course of events.

Companies that were hiring like mad in 2020 and 2021 to satisfy customer demand are now being forced to cut back or impose hiring freezes, with the possibility of a recession. CEOs have changed from hypergrowth mode in a matter months to concern over “macroeconomic uncertainties” which investors often hear on second quarter earnings calls. After their market debuts in 2021, Robinhood stock trading app and Coinbase crypto exchange both cut more than 1,000 jobs.

While airlines, hotels, and restaurants continue to recover from the Covid-induced shutdowns, they face the opposite problem. They can’t find enough workers quickly to meet demand after instituting mass layoffs in the early stages of the pandemic and now face a labor market that is drastically different than the one they had two years ago before the cutbacks.

Julia Pollak, chief economist of ZipRecruiter, stated that the pandemic created unique, once in a lifetime conditions in many industries, which caused a drastic reallocation capital. “Many of these conditions are no longer relevant so you’re witnessing a reallocation capital back to more regular patterns .”

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These patterns can be difficult to navigate for employers because of the fact that inflation has risen to a 40 year high and the Fed has raised its benchmark rate by 0.75 percent on consecutive occasions, the first time since 1990.

Concerns have been raised about the U.S. economy’s ability to contain inflation through central bank efforts. The National Bureau of Economic Research still has not made this declaration, but the gross domestic product has dropped for two consecutive quarters. This is the widely accepted rule of thumb that indicates a recession.

A downward trend was inevitable. Market experts lamented the frothiness of stock prices and absurdity in valuations as late last year’s fourth quarter. The major indexes reached record highs, led by the most risky assets.

This was evident when Rivian, an electric vehicle manufacturer, went public in November. It had almost no revenue but quickly reached a market capital of more than $150 billion. The record for Bitcoin was set that day at close to $69,000

Rivian’s value has fallen by about 80% since then. Bitcoin is now off by nearly two-thirds. The car company began laying off 6% of its workforce in July. Rivian’s headcount nearly quadrupled between late 2020 to mid-2022, reaching around 14,000.

Tech layoffs, and a touch of caution

Last week’s tech earnings calls were dominated by the topic of job cuts and slowdowns in hiring.

After nearly doubling its size during the pandemic and needing to increase its warehouse capacity, Amazon saw its workforce shrink by 99,000 to 1.52million employees at the end the second quarter. Shopify, which uses cloud technology to help retailers manage and build online stores, has cut around 1,000 employees, or 10% of its global workforce. As a result of the sudden rise in digitalization, Shopify doubled its workforce over two years.

Shopify CEO Tobias Lutke stated in a memo to employees, that the company had predicted that the pandemic would lead to an “immediate leap forward” of physical retail to ecommerce.

Lutke stated that it was now obvious that the bet didn’t pay off, and that things were starting to look more like they did before Covid. “Ultimately, this was my call to make and it went wrong. We now have to adapt.”

Facebook parent Meta failed to report its results and predicted a second consecutive quarter of declining revenue. CEO Mark Zuckerberg stated that the company would reduce job growth in the coming year. During the pandemic, headcount grew by 60%.

Zuckerberg stated that this is a time where we need to be more intense and expect more from our resources.

Google parent Alphabet recently advised employees to improve their productivity and focus on what they do best. The company grew its workforce by more than 30% in the two Covid years. The company sought suggestions for ways to improve efficiency at work.

Sundar Pichai, CEO of Sundar Pichai stated that it was clear that we face a difficult macro environment and more uncertainty in the future. “We need to think about how we can reduce distractions and raise the bar in product excellence and productivity span>

Peloton is one of the most severely affected U.S. businesses. Its fitness equipment and on demand classes were used as a replacement for locked-down gyms. Since then, it has suffered from huge oversupply problems and out-of control costs. Peloton announced in February that it would reduce 20% corporate positions after having doubled its headcount over the twelve months ending June 30, 2021.

Wall Street and banks brace for a hurricane’

Peloton products were offered as perks to overworked junior banksers who were needed to manage a boom of stock issuance, mergers, and IPOs. Junior bankers complained about their 100-hour work weeks and banks began to look for talent in other areas, such as accounting and consulting firms.

This explains why six of the largest U.S. banks added a total of 59,757 workers from the beginning of 2020 to the middle of 2022. It is the equivalent of an industry absorbing the entire population of a Morgan Stanley and a Goldman Sachs within a little more than two years.

This was not just about investment banking. To keep the economy afloat during widespread shutdowns, the government provided trillions in stimulus payments and small-business loans to help. The feared wave that would lead to loan defaults did not arrive, so banks took in unprecedented amounts of deposits. The repayment rates of their Main Street lending operations were higher than they had been before the pandemic.

Morgan Stanley was the top bank, seeing the largest increase in headcount. Its employee numbers grew 29% to 783,386 between the beginning of 2020 and the middle this year. This growth was partly due to James Gorman, CEO of E-Trade and Eaton Vance money management companies.

Staffing at rival investment bank Goldman Sachs jumped 22% from 47,000 to 47,000 during the same period. CEO David Solomon entered consumer finance and strengthened wealth management operations through the acquisition Fintech lender GreenSky .

Citigroup experienced a 15% increase in headcount due to the pandemic. JPMorgan Chase saw an 8.5% increase in its workforce and became the largest employer in the sector.

The good times at Wall Street did not last. The stock market suffered its worst half-year in 50 years and IPOs were a failure. The second quarter saw a sharp drop in investment banking revenue from the major players.

According to someone familiar with the plans of Goldman Sachs, they are considering slowing down hiring and possibly resuming year-end job cuts. When it comes to bank expenses, employees are the biggest line item. This means that when markets crash, layoffs are often on the horizon.

Jamie Dimon, CEO of JPMorgan, warned investors that an economic “hurricane” was coming in June and stated that the bank was preparing for volatile markets.

According to ZipRecruiter’s Pollak, mortgage lending is one area where there will be a lot of worker loss. Due to record low mortgage rates, and rising home prices, 60% more people opted for real estate in 2020-2021. JPMorgan and Wells Fargo reportedly cut hundreds of mortgage staffers after volumes plummeted.

Pollak stated that “Nobody refinances anymore” and that sales are slowing. “You will see the employment and hiring levels slow down. It was about that moment .”

As rising rates and falling stock multiples combine, the intersection of Silicon Valley & Wall Street is particularly dark. Coinbase, a crypto trading platform, announced in June plans to lay off 18% employees in preparation for “crypto winter.” It also canceled job offers for people it had previously hired. In 2021, the headcount will triple to 3,730 employees.

Robinhood, a stock trading app, announced Tuesday that it will reduce 23% of its workforce. This comes just three months after reducing 9% of its full time staff. The company’s total staff had risen from 2,100 to 3,800 over the past nine months of 2021.

Aaron Terrazas (chief economist at Glassdoor), stated that “we are at the tail end” of the pandemic-era distortion. It’s not going away. However, it is becoming more normalized and companies are adapting to this new reality span>

Retail whipsaws back and forth

The story of retail is more complex. A stark divide quickly erupted between those businesses that were considered essential and those not at the time of the pandemic.

Target and Walmart, which sell groceries and household goods, were allowed to keep their lights on while department stores and apparel shops were temporarily shut down. As sales crashed to a halt, Macy’s Kohl’s and Gap had the need to lay off the majority of their employees.

As these businesses reopened, and millions of consumers got their stimulus checks from the government, consumer demand surged to shops and online retailers. Companies added people to their workforce or hired them back.

Walmart started paying warehouse workers special bonuses and covered 100% of the cost of textbooks and college tuition for employees last August. Target offered a free college education to full-time and part-time employees. The company also increased its staff by 22% between 2020 and 2022. Macy’s promised higher hourly wages.

They couldn’t have foreseen how rapidly the dynamic would change, as rapid and high inflation forced Americans into tightening their belts. Already, retailers have warned of falling demand and have accumulated large inventories. Gap stated that higher promotional prices will impact gross margins during its fiscal second quarter. Kohl’s has lowered its guidance for the second-quarter due to softening consumer spending. Walmart last week reduced its profit forecast, citing rising prices for gas and food as the main reason.

This pain is affecting the ad industry. Pinterest, an online bulletin board, cited Monday’s “lower-than-expected demand from U.S. Big Box Retailers and Mid-Market Advertisers” as the reason it fell short of Wall Street’s second-quarter earnings estimates and revenue.

Retail giants have avoided major layoff announcements so far, but smaller players may be in the process of being cut. Game Stop, 7-Eleven, and Stitch Fix have all announced that they will be cutting jobs. Outdoor grill maker Weber has also warned it is considering layoffs due to slow sales.

The travel industry cannot hire fast enough

There has been a lot of downsizing in the U.S. Economy. This should open up the possibility for hospitality, restaurant, and airline companies that are trying to repopulate after suffering mass layoffs during Covid.

It’s not easy. Despite Amazon’s recent headcount reductions, the company still has far more warehouse workers than it did two year ago. The company raised the average starting salary to $18 an hour last year, which is a difficult level to achieve in the service industry.

Christopher Nassetta, Hilton CEO, stated on May’s quarterly earnings call that he was not satisfied with customer service and that more employees were needed. Even though travel was recovering strongly, Hilton’s headcount in managed, owned, and leased properties, as well as corporate sites, was down more than 30,000 from the previous two years.

It is easy to see why customer support can be a problem. McKinsey’s report on summer 2022 travel trends showed that revenue per room in the U.S. is outpacing not only 2020 and 2021 levels but also increasing 2019 levels.

The passenger jets of Delta Airlines are seen outside the new 1.3 million square foot, $4 billion Delta Airlines Terminal C at LaGuardia Airport in New York. It was completed June 1, 2022.

Mike Segar | Reuters

Headcount at airlines fell to 364,471 in Nov 2020, even though it wasn’t supposed. U.S. airlines accepted $54 billion in taxpayer assistance to keep their staff on the payroll. However, layoffs are not allowed, but voluntary buyouts are. Southwest and Delta have lost thousands of employees. Delta announced last month that it had added 18,000 employees since 2021, similar to how many it lost during the pandemic to cut costs.

It is difficult for the industry to find enough pilots and workers to train them. This process can take several weeks to comply with federal standards. American Airlines, Spirit Airlines, and Delta recently reduced their schedules to make it easier to handle operational challenges.

On the Delta CEO Ed Bastian’s quarterly earnings call last month, he stated that “the chief problem we are working through isn’t hiring but a learning and experience bubble.” Combining this with the lingering Covid effects, we have seen a decrease in crew availability and increased overtime. We will continue to improve our operational integrity .”

The traveler experience has been disappointing. More than 12,000 flights were delayed over the Fourth of July holiday weekend due to bad weather or insufficient staff. Pilots who retired early during the pandemic aren’t likely to reconsider their decision now that they are in high demand.

Professor Joseph Fuller of Harvard Business School’s management practice said, “When we look into labor shortages related travel, you cannot just flip a switch to suddenly have more baggage handlers who have passed security checks or pilots.” We still see people refusing to opt in to return because they don’t like the working conditions their employers have imposed on them in a post-lethal world span>

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