America’s largest newspaper publisher has a problem: it cannot find enough people to toss editions on to readers’ doorsteps.
Gannett, which publishes more than 250 titles from the Abilene Reporter-News to USA Today, is short of about 1,000 drivers to drop off papers in the small hours of the morning. About 12 per cent of its delivery routes are now unstaffed.
Yet at the same time, Gannett has told employees that “painful” cuts to staffing are coming as it tries to control costs in its declining print operations.
The disconnect between job shortages and lay-offs, even in a single company, illustrates the mixed messages emanating from the US labour market. A historic burst of hiring is colliding with questions about whether some employers have hired too fast.
As industries from trucking to fast food complain of labour shortages, businesses 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 unexpectedly high 528,000 jobs in July, bringing unemployment down to a historically low 3.5 per cent even after two quarters of declining gross domestic product.
“We’re all scratching our heads a little bit,” admits Martine Ferland, chief executive of Mercer, which advises companies on workforce and benefits issues.
“I’ve been in this industry for 25 years and I’ve never seen anything like it,” echoed Joanie Bily, chief workforce analyst at EmployBridge, which places workers in manufacturing, logistics and call centre jobs. “Even if we’re in a technical recession, this is a really different type of recession because the labour market still remains strong,” she said.
For Andrew Challenger, head of sales for Challenger, Gray & Christmas, the anecdotal evidence of widespread job cuts is not supported by his staffing company’s research. Lay-offs were above 2021 levels in June and July, but the number it tallied in the seven months between January and July was the lowest for a comparable period since it began tracking such cuts in 1993.
The US government’s job openings and labour turnover data only runs up to June but tells a similar story of lay-offs still running at historically low levels in most industries.
“We’ve been in a very severe labour shortage at a time when companies have been completely focused on hiring and have had their eye off lay-offs altogether. That being said, there are some reasons to believe we might be at an inflection point,” Challenger said.
The recent cuts his firm has tracked have been concentrated in a few sectors such as the automotive, construction and financial technology industries.
Areas of finance that are sensitive to rising interest rates, such as mortgage lenders, have also been affected, Bily at EmployBridge noted: “Two years ago those jobs were in such high demand and wages were going through the roof for loan processors and closers. That has come to a screeching halt.”
On Wall Street, too, the mood has shifted from bumper bonuses in 2021 to fears of lay-offs in 2022 amid a sharp decline in investment banking fees. Many firms have realised that they have a surplus of bankers, after unprecedented levels of dealmaking led them to cull fewer low-ranked performers than usual.
Analysts attribute the suddenly curtailed hiring plans of tech companies such as Etsy, Meta, Pinterest and Spotify to something else: overdue cost controls in a once free-spending sector whose funding and valuations has fallen sharply this year.
One change which has caught several industries off guard is a slowdown in the pace of employees leaving for better offers elsewhere.
The so-called quits rate remains well above pre-coronavirus pandemic levels in most sectors, but Mercer’s Ferland said that attrition has stabilised in recent months, making it harder for employers to gauge how many people they will need to recruit to replace the leavers.
Rob Sharps, chief executive of T Rowe Price, cited this factor at the fund manager’s latest earnings announcement. A fall in voluntary attrition “means headcounts can go up meaningfully”, he observed in explaining why it had become more careful about recruitment.
Such caution led to the number of job openings falling by 5.4 per cent between May and June, although at 10.7mn, the number of available positions remains well above early 2020 levels.
“For the last year and a half it’s just been blinders on, trying to hire as many people as you could get in the door. Nobody could keep up with the demand they had, but I think that’s starting to level off,” said Challenger. Now, he said, clients are starting to think more strategically about who they need in their workforce after a “wildly unpredictable” period.
In the meantime, he added, history suggests that the continued resilience of hiring may be little guide to the outlook for the US economy. “We know that employers always hire pedal-to-the-metal two or three months into a recession . . . It’s a lagging indicator.”
At Gannett, which advertises the chance to earn up to $600 a week by delivering newspapers, the shortages have started to ease up a little since June. But it sees several reasons why they will remain a problem.
“Many of these delivery people [also] work 9am-5pm jobs,” noted Wayne Pelland, its senior vice-president of publishing operations. As other businesses raise wages and offer more flexibility to fill entry-level positions, people are turning away from low-paid, part-time jobs that require early starts and expensive petrol bills.
As competition from employers offering better pay and career opportunities continues to drain the pool of people interested in part-time delivery jobs, Pelland said, “we are confronting a perfect storm”.
Additional reporting by Caitlin Gilbert, Joshua Franklin and Lydia Tomkiw
Source: Economy - ft.com