Efficiency and cost cuts — two words uttered countless times by CEOs on earnings calls over the past 12 months — will likely be a theme again for corporate America in 2024.
But this year won’t necessarily be a rinse and repeat moment for business leaders. The pendulum of the job market will likely swing back to employers, creating a “perfect storm” for businesses focused on boosting productivity, contends Glassdoor Lead Economist Daniel Zhao.
“The job market is expected to cool but remain resilient, which may be a perfect storm for businesses to focus on efficiency and productivity in 2024,” Zhao said.
Productivity among US workers started to improve during the third quarter of 2023 but lags its long-term trend. Labor productivity has grown at an annual rate of 1.5% during the current business cycle, compared to the long-term rate of 2.1%.
While improved profitability and cost-savings is music to the ears of shareholders as investors shift their focus from growth to profitability, for the American workforce, the message from management may be to work harder — in other words, do more with less.
“Continued concerns about an economic slowdown mean employers would rather search for cost savings rather than hiring prolifically to maintain growth,” Zhao added.
In a recent memo to employees, Wayfair (W) CEO Niraj Shah encouraged employees to increase productivity by being “frugal, agile, customer oriented, and smart” while putting in extra time at work.
“Working long hours, being responsive, blending work and life, is not anything to shy away from,” Shah wrote, reported first by Business Insider.
Shah has cut costs and reduced headcount over the past 18 months to right-size Wayfair’s cost structure. The company recently reported its second consecutive quarter of positive free cash flow, an achievement Shah called a “key milestone.”
And Shah is far from alone in his push for efficiency. Meta’s (META) Mark Zuckerberg, Goldman Sachs’s (GS) David Solomon and Amazon’s (AMZN) Andy Jassy are among a long list of CEOs cutting costs and adjusting headcount in an effort to improve longer-term growth.
How this all shakes out for employees and their workloads is still up for debate, but recent data shows workers may no longer have the upper hand, leaving them with little choice other than to do what their companies want.
“The premium that we measure from switching jobs versus staying at the same job was 7% at the start of 2023, and that premium has now shrunk to 2.5%,” ADP Chief Economist Nela Richardson told me on Yahoo Finance Live.
Richardson added: “The number of workers trying a new job on for size has really shrunk which means there’s just not as many opportunities out there. We’re still seeing low unemployment but the balance between supply and demand has come closer together.”