A Harbinger Of Weakness In The US Labor Market? Better Than Microsoft, It Has To Slow Down The Pace Of Recruitment

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Microsoft (msft.us) is regarded by most US stock investors as one of the important pillars of the Nasdaq 100 index, the benchmark index of technology stocks. Its strong fundamentals and contribution to us economic growth can often give market confidence in difficult times. However, according to a recent Bloomberg report, Microsoft may slow down its recruitment. The report said that Microsoft is slowing down the recruitment of new employees in its windows, office and teams departments.

Behind Microsoft's slowdown in recruitment: office Revenue growth or slowdown

Bloomberg quoted an internal e-mail confirmed by a Microsoft spokesman as saying that the slowdown in the pace of recruitment was because the company began to change its focus on staffing and cope with the uncertainty related to the global economy. According to Microsoft's administrative regulations, all new employees need to be approved by Rajesh JHA, executive vice president, and his team. Earlier this month, some media reported that Microsoft planned to "nearly double" its salary budget and increase the employee stock salary range by at least 25%.

Zhitong finance learned that some third-party recruitment agencies, including ziprerecruiter and Glassdoor, pointed out that the salary levels of Microsoft employees vary, and the salary levels depend on job functions. Software engineers are among the highest paid employees in the company. According to PayScale, a salary research organization, the average annual salary of Microsoft employees is about $122987, plus a bonus of $14000.

Some analysts believe that the slowdown in recruitment may not be a common phenomenon throughout the company, and the departments that have helped Microsoft achieve strong growth in recent years may continue to maintain the normal pace of recruitment.

The first quarter financial report data released by Microsoft in April this year showed that Microsoft's revenue was mainly from cloud computing business, which increased by 32% to US $23.4 billion; The revenue of productivity and business process departments (including office 365, LinkedIn, etc.) increased by 17% to US $15.8 billion, mainly due to the 17% increase in the revenue of office 365 commercial edition; By windows , xbox , search engines, and surface The revenue of the more personal computing division increased by 11% year-on-year to US $14.5 billion.

Some analysts believe that the slowdown in recruitment, especially in the office sector, may be due to a turning point in the macro environment. UBS analyst Karl keirstead lowered the revenue growth forecast of Microsoft Office 365 in fiscal year 2023 in April, pointing out that due to the high penetration of office 365 and the fading of the wave of home office, the revenue growth of Microsoft SaaS products such as office 365 may show a "moderate slowdown".

In terms of macro employment data, the May non-agricultural employment data to be released on Friday may indicate that the hot labor market in recent months will cool down. It is understood that according to the general expectation of economists, the non-agricultural employment population may increase by about 325000 in May, with an average increase of more than 400000 in the first two months. Although the growth rate remains strong, it is expected that the growth rate will be the smallest in more than a year.

Technology giants are also hard to bear the heavy pressure of inflation

Microsoft is not the first technology giant to admit that the pace of recruitment will slow down. Previously, some media exposed that the pace of recruitment of nvidia.us has slowed down significantly. Media reports said that NVIDIA's senior management asked recruitment managers to improve recruitment standards and reduce the number of employees in various departments. Some senior management even wanted to suspend recruitment to manage and absorb the thousands of new employees recently recruited by NVIDIA.

It is understood that the latest financial report data show that NVIDIA's GAAP operating expenses in the first quarter increased significantly compared with the same period last year. In addition to the $1.35 billion "break-up fee" (acquisition termination fee) to be paid for the termination of the acquisition of arm, NVIDIA Q1's research and development costs, as well as sales, general costs and management costs have increased, which may reflect the pressure on business operations caused by high inflation in the United States, Enterprises have to spend higher costs in maintaining and improving business efficiency.

According to the statistical results of the latest salary survey conducted by human resources organizations, after the large salary increase in the past year, enterprises are now more cautious about cost expenditure, fearing that further large salary increases will erode profits. Jonas prising, CEO of manpower company Wanbao Shenghua group, said: "wages have risen to the level of 'employers can't afford it'. Employers will think like this: my consumers and customers won't accept my further transfer of these costs, so we need to start reducing costs."

The heavy pressure of high inflation not only puts pressure on enterprise recruitment, but also on future revenue. Some technology giants have reduced the scale of revenue in the next quarter in the latest performance guidelines. Snap (snap.us) pointed out last week that the degree and speed of the deterioration of the macroeconomic environment exceeded expectations. It is expected that its revenue and core profit indicators (adjusted EBITDA) in the second quarter will be lower than the lowest level of the performance guidelines published in the April financial report, and its market value will nearly halve the next day after the guidelines are updated.

Even apples (aapl.us) also said at the performance meeting last month that due to various negative factors such as supply chain problems, its revenue in the coming fiscal quarter will be reduced by $4-8billion. After the results were announced, Apple's share price had fallen by more than 8% as of last Friday. Amazon (amzn.us) predicted at the performance meeting that the net sales in the second quarter was US $116billion to US $121billion, less than the US $125billion generally expected by analysts, and there may be another loss in the second quarter. The company predicted that the operating profit in the second quarter would range from -1billion US dollars to 3billion US dollars, far less than the 6.8 billion US dollars generally expected by analysts. After the results were announced, its share price fell by more than 20% as of last Friday.

After the announcement of Microsoft's results, its share price performed relatively well, falling only 2% as of last Friday. Although Microsoft's share price has performed better than some competitors, its share price has fallen by more than 20% so far this year. It seems that the software giant is not completely immune from the negative impact of economic uncertainty. On Monday, Jeffrey, a major Wall Street firm, sharply lowered the target share prices of several technology companies, including Microsoft, on the grounds that the U.S. economy is facing "increasingly severe economic headwinds and potential recession risks". Among the companies evaluated by Jeffrey, Microsoft's target price was lowered from $400 to $325.

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