[US] Staff shortages continue despite wage increases

[US] Staff shortages continue despite wage increases
02 Nov 2021

Some of America’s largest companies continue to struggle to secure enough staff to handle a surge in consumer demand, despite raising their wages to levels that are prompting some to increase prices to protect their profit margins, Financial Times reports.

Earnings announcements last week communicated the difficulty that employers from fast-food restaurants to E-commerce warehouses are having with recruiting and retaining workers as heightened consumer spending collides with a historically tight labour market. 

McDonald’s described a “very challenging staffing environment”, Starbucks referred to “rapid” increases in its wage costs and Amazon predicted that “labour inflation” would add $2bn to its cost base in the fourth quarter. 

“For the foreseeable future, our capacity constraint is actually labour, which is new and not welcome,” Amazon’s chief financial officer, Brian Olsavsky, said. He added that the shortages were affecting its productivity and service levels. 

“The problem is that everybody is rushing to fill the jobs” now that the economy has opened up, Carol Tomé - UPS’s chief executive - said. “That’s why you see so much pressure out there.” 

Rubbish collection and recycling group Waste Management said underlying inflation in its payroll costs hit 8.7 per cent in the third quarter. John Morris - the group’s chief operating officer - attributed the “acute” staff turnover it witnessed to the phenomenon economists have dubbed ‘the great resignation’, in which millions of workers are quitting their jobs and rethinking their careers. 

Companies from IBM to Sherwin-Williams, the paint manufacturer, said they had adjusted wages not only to attract new staff but also to retain existing employees. Retention is becoming “increasingly challenging”, Cynthia Sanborn - chief operating officer of Norfolk Southern - said. She explained that the railroad operator had seen attrition accelerating for the past two quarters. This feedback, from some of the country’s largest employers, comes ahead of Friday’s jobs report, which investors are watching closely after last month’s payrolls data showed that the US economy added just 194,000 jobs in September, well below forecasts. 

Employers are responding by offering higher pay packages. US Labor Department figures released on October 29 show wages and benefits rising at their fastest pace since 2001. The employment cost index advanced by 1.3 per cent between the second and third quarters. Costco increased its minimum wage to $17 per hour last week, following an earlier hike to $16 an hour in February. Starbucks will make further pay rises from January which will see its US hourly workers making an average of nearly $17 an hour by summer 2022. 

McDonald’s said its franchisees were experiencing wage inflation of more than 10 per cent but some had still needed to cut back late night opening hours because of staffing shortages. Restaurant Brands International - which owns Burger King - said labour issues had forced some restaurants to close their dining rooms. 

“I think it is going to continue to be a difficult environment for the next several quarters,” McDonald’s CEO Chris Kempczinski said. McDonald’s was among companies including Kimberly-Clark, the Kleenex tissue maker, which said they were passing on the increased costs to customers by raising prices.

The burger chain expects its US menu prices to be up about 6 per cent this year over 2020, contributing to higher profit margins. Those increases, coupled with elevated consumer demand, helped power strong profits growth.

Third-quarter earnings for S&P 500 members are running 36.6 per cent ahead of last year, according to FactSet, putting corporate America on track for its third-highest year-over-year quarterly growth since 2010. 


Source: Financial Times

(Quotes via original reporting)

Some of America’s largest companies continue to struggle to secure enough staff to handle a surge in consumer demand, despite raising their wages to levels that are prompting some to increase prices to protect their profit margins, Financial Times reports.

Earnings announcements last week communicated the difficulty that employers from fast-food restaurants to E-commerce warehouses are having with recruiting and retaining workers as heightened consumer spending collides with a historically tight labour market. 

McDonald’s described a “very challenging staffing environment”, Starbucks referred to “rapid” increases in its wage costs and Amazon predicted that “labour inflation” would add $2bn to its cost base in the fourth quarter. 

“For the foreseeable future, our capacity constraint is actually labour, which is new and not welcome,” Amazon’s chief financial officer, Brian Olsavsky, said. He added that the shortages were affecting its productivity and service levels. 

“The problem is that everybody is rushing to fill the jobs” now that the economy has opened up, Carol Tomé - UPS’s chief executive - said. “That’s why you see so much pressure out there.” 

Rubbish collection and recycling group Waste Management said underlying inflation in its payroll costs hit 8.7 per cent in the third quarter. John Morris - the group’s chief operating officer - attributed the “acute” staff turnover it witnessed to the phenomenon economists have dubbed ‘the great resignation’, in which millions of workers are quitting their jobs and rethinking their careers. 

Companies from IBM to Sherwin-Williams, the paint manufacturer, said they had adjusted wages not only to attract new staff but also to retain existing employees. Retention is becoming “increasingly challenging”, Cynthia Sanborn - chief operating officer of Norfolk Southern - said. She explained that the railroad operator had seen attrition accelerating for the past two quarters. This feedback, from some of the country’s largest employers, comes ahead of Friday’s jobs report, which investors are watching closely after last month’s payrolls data showed that the US economy added just 194,000 jobs in September, well below forecasts. 

Employers are responding by offering higher pay packages. US Labor Department figures released on October 29 show wages and benefits rising at their fastest pace since 2001. The employment cost index advanced by 1.3 per cent between the second and third quarters. Costco increased its minimum wage to $17 per hour last week, following an earlier hike to $16 an hour in February. Starbucks will make further pay rises from January which will see its US hourly workers making an average of nearly $17 an hour by summer 2022. 

McDonald’s said its franchisees were experiencing wage inflation of more than 10 per cent but some had still needed to cut back late night opening hours because of staffing shortages. Restaurant Brands International - which owns Burger King - said labour issues had forced some restaurants to close their dining rooms. 

“I think it is going to continue to be a difficult environment for the next several quarters,” McDonald’s CEO Chris Kempczinski said. McDonald’s was among companies including Kimberly-Clark, the Kleenex tissue maker, which said they were passing on the increased costs to customers by raising prices.

The burger chain expects its US menu prices to be up about 6 per cent this year over 2020, contributing to higher profit margins. Those increases, coupled with elevated consumer demand, helped power strong profits growth.

Third-quarter earnings for S&P 500 members are running 36.6 per cent ahead of last year, according to FactSet, putting corporate America on track for its third-highest year-over-year quarterly growth since 2010. 


Source: Financial Times

(Quotes via original reporting)