Yahoo Finance Look for a hiring slowdown, says EY CEO
Jobs are back! The official unemployment rate is at 5.5%, a seven year low. Happy days are here again, right?
Well, not really. The labor participation rate is near a 37-year low and real wages have fallen or been stagnant for the past 35 years. Workers everywhere are doing more with less and 68% of U.S. employees feel disengaged with their jobs, according to Gallup. Things seem unlikely to get better soon. Mark Weinberger, CEO of consulting and audit firm EY (formally Ernst & Young), says large companies won’t be looking to hire for some time. “You’ve seen a lot of disruption from the oil price going way down, you’ve seen companies pulling back and laying off employees left and right,” he says.
There are bright spots. Weinberger points to McDonald’s and Walmart raising the pay of some employees as a sign fresh hiring may lead to a labor shortage. But “it’s very different by industry,” he says.
Weinberger thinks the longer-term picture is brighter because of an increase in merger and acquisition activity. “We’re looking at probably the fastest growth in M&A overall that we’ve seen in the last five years in terms of optimism by the capital confidence barometer.” The economy has seen a lot of “blockbuster” M&As like Office Depot (ODP) and Staples (SPLS), AT&T (T) and DirecTV (DTV), Oracle (ORCL) and Micros Systems. This year we’ll start to see the fad move down-market to the supply chain.
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This all seems counter-intuitive-- mergers typically lead to redundancies and layoffs, at least in the short run. “Obviously sometimes you get a cost-benefit from cutting back on ‘synergies’ as they call it in these big mergers,” Weinberger says. “But other times you’re repositioning to take advantage of new opportunities and to create more jobs though maybe not the same jobs that were lost.”
It's the skills gap that's really holding back America’s employees, explains Weinberger. At his own firm, he can’t find enough people to hire who are proficient in math and engineering. EY, which already has about 200,000 employees worldwide, plans to hire around 65,000 more this year “and we’re looking all over the world but we still have a skills gap.”
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