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Uber is one of many technology companies that slow down hiring and reduce costs.
Drew Angerer / Getty Images
Meta platforms, a parent of Facebook, travel sharing service provider Uber Technologies and technology and online retail giant Amazon.com have announced delays in hiring in recent weeks. According to one economist, it’s all about cutting costs.
Peter Bukvar, chief investment officer at Bleakley Advisory Group, told industries such as restaurants and grocery stores that labor demand still exceeds supply. But for technology companies, rising business costs leave them with little choice in how to improve their profit margins, which Bukvar said investors expect to grow.
“For companies that are under a lot of price pressure, there is so much that they can raise prices and will have to cut costs in other ways if they want to recoup their lost profits or at least try to keep some profit margins. that they had before Covid, “he said. “Labor is the biggest expense, so if you want to pull a lever that affects costs, it’s your job.
CNBC reported on Monday that Uber (ticker: UBER) plans to delay hiring and cut costs in response to “seismic change” in the market. According to CNBC, Uber CEO Dara Khosrovshahi sent an email to staff, saying the company would treat “hiring as a privilege and be aware of when and where we add staff.” He added that Uber “will be even tougher in terms of spending across the country.”
Amazon chief financial officer Brian Olsawski said during a conference call on the company’s revenue that Amazon has too many workers after hiring more due to the advent of the Omicron variant of Covid-19.
“As the option faded in the second half of the quarter and employees returned from leave, we quickly moved from a lack of staff to a surplus, which led to lower productivity. This lower productivity added approximately $ 2 billion in costs compared to last year, “Olsavski said. “We expect to reduce these side winds in spending in the second quarter.”
Meta said it would reduce plans to add employees a few days after the announcement of second-quarter earnings. Meta Chief Financial Officer Dave Venner told investors that “given the resulting adverse revenues, we have adjusted our plans for hiring and spending growth this year.”
While technology is experiencing a slowdown in employment, there are currently no signs of this in the larger labor market.
According to the U.S. Bureau of Labor Statistics, total non-agricultural employment in the United States increased by 428,000 in April, and the unemployment rate remained unchanged at 3.6%.
However, although the larger job market has not yet felt the effects of the trend, Bukvar said he expects to see moderation in employment.
“I think the economy is slowing down,” Bukvar said. “We’ll get to the point where most of the delay in hiring is due to people wanting to keep a cover for their expenses.”
Write to Angela Palumbo at angela.palumbo@dowjones.com
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