Some of America's biggest companies are hinting the labor shortage is ending for them

Some of America's biggest companies are hinting the labor shortage is ending for them
A sign for Walmart's home office.Gilles Mingasson/Getty Images
  • Over the last year, companies have complained about labor shortages and difficulty hiring.
  • With fears that the economy is cooling off, firms are cutting costs — for some that means cutting workers.

For over a year, companies have had one big complaint: Nobody wants to work anymore.

Now, though, the tide seems to be turning. Firms have shifted to talking about getting rid of their staff to save costs, and becoming leaner.

Lyft's chief financial officer Elaine Paul said in an earnings call that the company has "materially pulled back on hiring."

Walmart's first quarter earnings call in May saw CEO Doug McMillon saying that the company was overstaffed after employees came back to work from Covid leave sooner than expected.

"We hired more associates at the end of last year to cover for those on leave, so we ended up with weeks of overstaffing," he explained. "That issue was resolved during the quarter primarily through attrition."


In other words, overstaffing was solved by people leaving — something that runs contrary to the narrative that companies are eager to hire and can't find anyone. Then, the company laid off 200 corporate roles at the start of August.

Prabir Adarkar, the chief financial officer of DoorDash, said in the company's second quarter earnings call that "last year was anomalous" because it was "a very expensive labor environment that's fueled by fiscal stimulus." But while July marked a 5.2% rise in average wages nationwide compared to the year prior due to a competitive market for talent, Adarkar said that's not going to happen this year. It's another hint that companies won't be as desperate to hire in coming months.

Though hiring is still robust overall, layoffs remain low, and a workers are still quitting in near-record numbers, the number of job openings fell lower than expected in June. That, coupled with recent commentary from CEOs, could markthe beginning of the end of the labor shortage. After a whole slew of factors — such as lack of childcare, a pandemic, and low wages — kept workers on the sidelines, companies might be starting to be okay with that.

It's another sign that the economy is changing — and, in some cases, splitting in two. Though we're not in an economic recession yet, some companies have already made major cuts to their workforces and are facing their own Great Regret over hiring too much. They're billing it to shareholders as a cost-saving measure, in addition to hinting that labor will be less expensive in the year to come as the wage gains ushered in by a labor shortage abate. While layoffs aren't mass or widespread yet, the pace of hiring has slowed since last year's hiring bonanza.

For workers, that might mean that the leverage they wielded in the Great Resignation is shrinking — bad news for those who have been asking for better pay, benefits, or quality of life.


Meanwhile, reduced staffing might just become the new normal at some firms

Leisure and hospitality was one of the pandemic's hardest hit industries, and accommodation is one of the top 15 industries still lagging behind in recovery. As Insider's Ben Winck and Madison Hoff report, accommodation is still down 404,900 payrolls from its February 2020 levels, a 19% decrease in employment. But even hotels are keeping their workforces lean.

Tom Baltimore, chairman and chief executive officer of real estate investment firm Park Hotels & Resorts — which is affiliated with brands like Hilton and Hyatt — said in an earnings call that headcount at their Hilton-managed hotels had dipped by 23% for managers and 29% for full-time hourly employees compared to 2019.

"We firmly believe that the operational changes behind many of the staffing reductions are permanent, translating into $85 million in savings," Baltimore said.

Similarly, Jim Risoleo, the president and chief executive officer of Host Hotels & Resorts — another real estate investment trust — said in an earnings call that the company had eliminated some positions "to become more efficient and increase productivity." Risoleo thinks that the "labor situation is going to stabilize."

Amy Shapero, Shopify's chief financial officer, said in a first quarter earnings call that they expected to see the labor market "ease." "We're already starting to see news and information about that easing," Shapero said. Shopify went on to layoff about 1,000 workers months later.


Meanwhile, movie theater chain Cinemark is gearing up for a lighter film slate in August and September. In response, they'll "essentially ramp down our operating hours and our labor hours" until the fourth quarter, chief financial officer Melissa Thomas said in a second quarter earnings call.

They're not the only company going leaner: Phil Hardin, chief financial officer and treasurer at Beyond Meat, said that beyond the announcement of layoffs, "there's a lot more" the firm can do outside of reducing costs for people.

"The intent is that we continue to reduce the rate of cash consumption as we go through the year," Hardin said in an earnings call.

All of that points to leaner companies, less hiring, and reduced workforces — a sharp contrast to the labor market jobseekers have experienced over the past year, which won them higher wages and a better quality of life. Economists say that the only way to permanently enshrine those wins for workers is through structural change, whether new laws, regulations, or an even more concentrated labor movement. After all, a looming recession could wipe it all out.