Major US employers from fast-food chains to arms manufacturers are reporting a dramatic improvement in hiring conditions despite official data showing unemployment at its lowest level for decades.
Senior executives across a host of S&P 500 companies gave optimistic updates on the labour market in recent quarterly earnings reports. Their commentary could reassure investors concerned that a tight labour market threatens the Federal Reserve’s efforts to bring down inflation.
“Corporate commentary has been very notably different from previous quarters,” said Binky Chadha, chief global strategist at Deutsche Bank. “It may not be fully representative but it is still a very good chunk of the US economy . . . so I would look for the data to [catch up] to what companies are saying and experiencing.”
Unexpectedly resilient job growth figures released at the start of this month triggered a sharp drop in stock and bond prices, as investors feared rising wages would force the Fed to lift interest rates further.
However, Christopher Nassetta, chief executive of hotel chain Hilton, epitomised the comments of many executives at large groups when he told analysts this month that “we are not fully back to where we were in terms of access to labour, but we’re getting awfully close”.
For many consumer-facing businesses such as Yum Brands, which owns fast-food chains KFC and Taco Bell, staffing shortages since the start of the coronavirus pandemic have not only driven up costs but also hit sales as some restaurants struggled to maintain normal operating hours.
This month, however, Yum chief executive David Gibbs said “we’re seeing an increase in applications, stores [are] returning to their pre-Covid operating hours . . . we like the environment we’re in”.
Fellow high street chains Starbucks and Chipotle, meanwhile, reported improvements in employee retention, which Starbucks chief reinvention officer Frank Britt said would reduce training costs and “helps stabilise operations”.
The improvement has not been limited to lower-paying industries such as restaurants and hotels. Boeing chief executive David Calhoun, for example, told analysts that “we’ve had no trouble hiring people”, and said pressures through its supply chain had “really ease[d] up”.
Few companies said the challenges had completely lifted — even after the recent improvement, one in 10 Chipotle restaurants remained short-staffed, and some industries were suffering from shortages of specific skilled workers, such as airline pilots.
Home Depot this week said it would spend an additional $1bn this year raising wages for in-store employees, and Russell Price, chief economist at financial services group Ameriprise Financial, said pressures were likely to last longer for smaller companies that tend to pay lower wages and benefits.
Still, he added, the optimism at larger groups was an “encouraging” sign.
“It’s an incremental pace of improvement — you won’t have everyone get back to normal at once, but you have to start with a handful . . . that should continue to expand as we go forward.”