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What Layoffs? Many Employers Are Eager to Hang On to Workers.


During the height of the pandemic, hungry and unable to stay home customers ordered Home Run Inn Pizza’s frozen thin pies. The company did everything to compel.

It keeps its machines running during lunch breaks and hires temporary workers to ensure it can produce pizzas at breakneck speeds.

Recently, demand has eased, and Home Run Inn Pizza, based in suburban Chicago, has reversed some of those measures. But it has no plans to lay off any full-time production employees — even if that means a few more workers than needed during the second shift.

“We have really good people,” said Nick Perrino, chief executive officer and great-grandson of the company’s founder. “And we don’t want to let any of our team members go.”

Despite a year of aggressive interest rate hikes by the Federal Reserve aimed at curbing inflation and signs that the red-hot labor market is cooling, most companies haven’t taken the step of cutting jobs. . Outside of a few well-known companies that primarily operate in the technology sector, such as Google’s parent company Alphabet, Meta and Microsoft, layoffs across the economy are still rare. even in history.

Government data shows fewer employees were laid off in December than in any other month in the two decades before the pandemic. Unemployment insurance claims have barely increased. And the unemployment rate, at 3.4%, is the lowest since 1969.

“We haven’t seen any layoffs yet,” said Janis Petrini, co-owner of the Express Employment Professionals HR agency office in Grand Rapids, Mich.

For Federal Reserve policymakers, The surprising strength of the job market is a source of both optimism and concern. Low unemployment means a recession isn’t imminent, but it also means the Fed hasn’t met its goal of slowing the economy.

For workers, the picture is clearer: For now, at least, the historically strong job market remains intact.

Economists say many factors can cause employers to retain workers. Some may worry about how difficult and expensive it has been to recruit and train employees in recent years. Some people may worry about finding themselves understaffed if they urgently need to hire after a fleeting downturn — as was the case with the rapid reopening of the economy in the early stages of the pandemic. Others may still be trying to make up for staffing shortages following the upheaval of the pandemic. For example, the entertainment and hospitality industry still has about half a million jobs below pre-pandemic levels.

More fundamentally, the pandemic and the continuing tightening labor market that followed, may have profoundly reshaped how the nation’s employers think about staffing levels and hiring.

“As the economy rebounded strongly in 2020, a lot of companies tried to re-hire but they couldn’t,” said Matt Notowidigdo, a professor of economics at the University of Chicago’s Booth School of Business. “That experience is probably still sitting with people.”

At Home Run Inn Pizza, in Woodridge, Ill., Mr. Perrino says it’s important to attract and retain workers, especially for shifts that can start at midnight or last into the night. late at night, proved extremely difficult. (Besides the frozen cake business, the company also has several restaurants in the Chicago area.) That, along with his loyalty to his employees — “I don’t think we’ve ever been. fired employees in his company history he said contributed to his desire to retain his full-time employees, including 135 in manufacturing.

“Finding talented employees who want to stay and want to commit to the long-term success of the company — it’s a huge challenge,” he says.

For some companies, especially those in the consumer-facing services business like entertainment and hotels, the logic to avoid layoffs is simpler: Demand remains strong, and they need help. .

John Keener, a restaurateur in Charleston, SC, said his establishments, which include two locations Charleston Crab House and AW Shuck’s Seafood Shack, have been seriously understaffed since the early days of the pandemic.

To attract employees, he said, he increased his salary, offered more generous benefits and started advertising open jobs on LinkedIn, Yelp, Facebook and Instagram. When that wasn’t enough, he figured out how to work less, changed the menu so he had less chefs to prepare, and provided waiters with portable electronic devices so they could transmit commands directly to the kitchen without leaving the floor.

But as spring’s most important tourist season begins, he’s more eager than ever to hire more staff — 50 people, which, if he gets his wish, will bring his total staff to a whole new level. he’s about 270 people.

“They’ve been talking about a recession since the beginning of last summer, and if we start worrying about that and anticipating that, then we’re in the wrong rabbit hole,” he said. “We just kept plugging in.”

The persistent strength of consumer demand — and the continued hiring it has spurred — has irked policymakers at the Federal Reserve. Fed officials are concerned that a thriving job market is contributing to inflation, with employers raising wages to attract scarce labor, then raising prices to cover their higher labor costs. Surname. That could force the central bank to raise interest rates even further, ultimately increasing the risk of a severe recession.

But the low layoffs also point to the possibility of a brighter scenario. Higher interest rates often lead to higher costs and weaker sales, which often leads to layoffs. Instead, if companies respond by cutting hiring or raising wages – while keeping existing employees – that could allow the labor market to cool down without the loss of jobs. jobs on a large scale.

There are signs that are happening. In earnings calls and investor presentations, company executives in recent months have begun talking about their efforts to cut costs and limit spending, even in case their own sales remain strong. Some have moved to freeze hiring, cut bonuses or cut back on the use of contractors. So far, they’ve barely had to make large-scale layoffs like before, said Julia Pollak, chief economist at job site ZipRecruiter.

“The biggest story is the absence of layoffs – the absence of layoffs that you usually see when interest rates are higher,” she said.

That anomaly was evident at Grow Therapy, an online service that helps patients make appointments with therapists who accept their insurance. The company has been hiring quickly, adding staff to meet the demand it anticipates for months to come. But corporate growth relies on venture capital funding — and venture capital is about to become much more difficult and costly to obtain.

So in May, Grow Therapy temporarily froze hiring for most roles. It also introduced rules that required all co-founders to log out before anyone could be hired for unfrozen roles. To meet short-term staffing needs, the company turned to an outside temporary agency instead of hiring full-time employees.

Jake Cooper, co-founder and chief executive officer, says one thing Grow Therapy has never seriously considered is laying off workers. Mr. Cooper said demand was still strong and growing. And the company hopes to continue hiring in the future – which could be more difficult if you cut jobs now.

“There is a risk of a death spiral, where when you lay off a large portion of your staff, the rest of you will be less happy and more overworked,” he said. “If you’re laying off employees, it’s hard to quantify, but it’s certainly much harder to hire high-quality candidates.”

But economists warn that while companies may be clinging to their workers, that could change quickly if abstract fears of a recession turn into a sales slump. reality. Economists warn that a recession, if it happens, will almost certainly force companies to make mass job cuts — no matter how reluctant they may be after the recent experience with tight labor market.

“It’s risky,” said Notowidigdo, referring to companies’ strategies to retain workers even as business slows. “You may have to lay off multiple rounds in the future if the recession turns out to be more severe than expected.”

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