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Efficiency and cost reduction, two words heard repeatedly by CEOs on earnings calls over the past 12 months, will be the themes again for American companies in 2024.
But this year doesn’t necessarily mean a year of refreshment for business leaders. The job market pendulum will likely swing back toward employers, creating a “perfect storm” for companies focused on improving productivity, argues Daniel Chao, chief economist at Glassdoor.
“Although the job market is expected to cool, it remains resilient, and 2024 could be the perfect storm for companies to focus on efficiency and productivity,” Zhao said. Ta.
U.S. worker productivity began to improve in the third quarter of 2023, but has lagged behind long-term trends. Labor productivity grew at an annual rate of 1.5% in the current business cycle, while the long-term growth rate was 2.1%.
As investors shift their focus from growth to profitability, increasing profitability and reducing costs may be music to the ears of shareholders, but for the U.S. workforce, the message from management is to work harder, In other words, it may be about getting more done with less effort.
“Continued concerns about economic slowdown will prompt employers to seek cost reductions rather than hiring in large numbers to sustain growth,” Zhao added.
Wayfair (W) CEO Niraj Shah said in a recent memo to employees that they can be “frugal, nimble, customer-focused, and smart” while spending extra time on the job. Encouraged employees to increase productivity.
“Long hours, responsiveness, and blending work and life are things we should never shy away from,” Shah wrote, as first reported by Business Insider.
Mr. Shah has spent the past 18 months cutting costs and reducing headcount to right-size Wayfair’s cost structure. The company recently reported its second consecutive quarter of positive free cash flow, an achievement Shah called “an important milestone.”
Shah is not alone in his pursuit of efficiency. Mark Zuckerberg of Meta (META), David Solomon of Goldman Sachs (GS), Andy Jassy of Amazon (AMZN) and others are cutting costs to improve long-term growth. It’s among a long list of CEOs making headcount adjustments.
How this will affect employees and their workload is still up for debate, but recent data shows that employees no longer have an edge and have little choice but to do what the company wants them to do. It may be missing.
Planned layoffs will jump 98% in 2023 as fewer companies pay bonuses and people will no longer receive large pay increases when they change jobs.
“The premium for staying in the same job versus changing jobs was 7% in early 2023, but has now shrunk to 2.5%,” ADP chief economist Nella Richardson told Yahoo Finance Live. he said.
Richardson added: “The number of workers trying out new jobs for size is actually decreasing, which means there aren’t as many opportunities out there. The unemployment rate is going down. Although still low, the balance between supply and demand is coming closer.”
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