U.S. Companies Target Wages, Efficiency Hacks as Hiring Toughens

(Bloomberg) -- America’s labor market looks red hot, but company earnings calls show little evidence of businesses getting burned.

July jobs data, scheduled for release on Aug. 3, are expected to show an unemployment rate hovering around its lowest level since 2000. Yet many corporations describe labor tightness and wage pressures as manageable in their conference calls on earnings.

Some are paying more but passing on costs to customers, while many are making up for wage hikes with efficiency improvements. Others report that they’re having no trouble at all with hiring. Only a handful say that things have gotten so tight that they’re struggling to boost their labor pool and missing out on business as a result. It paints a picture of a job market that’s warm but not boiling, one where employers largely still have the power to find talent when they need it.

Read on for a roundup of specific examples from conference calls, grouped by the way companies are handling hiring pressures. All comments are from transcripts available on the Bloomberg Terminal at NH BT.

Paying Up

Kirby Corporation, July 26

The inland and offshore tank-barge fleet operator is paying more and doing so before competitors make similar moves, but it described the increases as “normal” for this point in the business cycle.

“We’ve been through these cycles before and we just want to keep our mariners,” Chief Executive Officer David Grzebinski said. “I would say this is kind of normal increases in wages. Probably a little earlier as we preempted it.”

Hershey Co., July 26

“We’re seeing a standard inflation that we always see going through on wages and benefits that again, what I think, is industrywide throughout the country,” said Patricia Little, chief financial officer at the candy maker.

Republic Services, July 26

“Some of this wage inflation that we talked about is in select markets, but we’re handling that well,” CEO Donald Slager said of his waste-disposal company. “And in fact, our time to fill open positions is actually down year-over-year.”

“We’ve got great training programs to bring people into the pipeline. So, I think we’re poised to again handle the growth that comes,” Slager said.

Cashing In

Robert Half International, July 24

“Margins typically expand in these kind of markets because we have an opportunity to have a discussion with the client that says the realities of market are we’re having to pay more,” said Keith Waddell, chief financial officer at the staffing company, which specializes in accounting, finance and other relatively high-skill job categories. “You’ll then have to pay more to get the kind of candidates that you want on your assignment.”

There are also signs that companies are growing less picky.

“With clients we’re becoming labor consultants because to the extent their first choice cost more or it’s hard to source, we help them understand people with adjacent skills, people with a little less experience that based on our data, based on our history, say can still perform well on their engagements,” CEO Harold Messmer Jr. said.

Getting Efficient

PGT Innovations, July 24

“Since mid-2016, we have invested more than $13 million in a new state-of-the-art facility and upgrading engineering and manufacturing equipment,” said Scott Gates, CEO of Western Window Systems, speaking on a conference call to discuss PGT Innovations’s acquisition of the window and glass wall-making company. “These investments have driven efficiencies in receiving, shipping, and labor that reduced manufacturing costs as a percentage of sales and enabled us to increase output.”

Losing Out

Martin Marietta Materials, July 26

“Demand for our construction products is growing and we have both the ability and capacity to supply the needed building materials,” said Ward Nye, CEO at the supplier of products including aggregates, concrete and asphalt. But freight constraints are slowing deliveries and preventing the company from satisfying demand, he said, citing “railroad service issues, finite truck availability, and contractor labor shortages.”

“Fortunately, we expect these temporary bottlenecks to ease and throughput to improve as the construction sector attracts capital investment and provides increased wages,” Nye said.

Productivity Pain

Old Dominion Freight Line, July 26

“We have added folks across the network,” said Greg Gantt, CEO of trucking company Old Dominion. “The pressures that we’ve seen and the issues that we’ve seen are in the lost productivity that we’ve had in the second quarter. We’ve added a lot of folks,” and “it takes time to get those new employees up to speed.”

The company cut its pay-and-benefits bill to 50.5 percent of revenue in the second quarter from 52.6 percent in the same quarter last year even as it expanded its full-time labor force -- in other words, its wage bill isn’t rising as fast as its business. Gantt said Old Dominion was successful in its hiring, saying he was “glad we’ve been able to ramp up and ramp up clear, and as we’ve needed.”

©2018 Bloomberg L.P.