- Amazon (AMZN) says it’s created more jobs in the past decade than any other U.S. company
- It’s a big deal for growing Amazon’s share price
- Keep following the company’s job-creation record
The big news surrounding Amazon (NASDAQ:AMZN) and AMZN stock these days is the company’s 20-for-1 stock split scheduled for June 6.
The reality is that the split won’t do much for its share price appreciation. It might help in the short term. However, investors are looking for evidence that its strong growth in revenues and profits will continue in the long term.
One way to judge a company’s success is by job creation. Companies adding jobs by the boatload usually aren’t stagnant, dying businesses.
That’s Amazon. The company’s corporate website says, “In the past decade, Amazon has created more jobs than any other U.S. company.”
While I’m not about to try and prove if that statement’s accurate — an exercise in futility if you ask me — it’s hard not to notice the company’s meteoric rise to power parallels a period of significant job creation.
Over the past 10 years, AMZN stock has had a total annualized return of about 32.6%. That’s double the NASDAQ exchange over the same time.
How many jobs do you think Amazon’s created over the past decade? I’ll get into that and why investors ought to keep an eye on this statistic in the future.
AMZN Stock and Job Creation
Before I get into the heart of the matter, let’s get the answer to the above question out of the way before proceeding any further.
At the end of 2021, Amazon employed 1,608,000 full-time and part-time employees. At the end of 2011, it had 56,200 full-time and part-time employees. That’s a compound annual growth rate (CAGR) of 39.9%, not too far off its annualized total return.
Now, I’m not suggesting that my theory that share prices follow job growth is foolproof, but I’d hazard a guess that it’s not dissimilar to share prices following earnings.
MarketWatch published an opinion piece by Rex Nutting in January 2016 that discussed the correlation between job creation and public companies and the failure of the JOBS Act actually to create new jobs.
“New research by Jerry Davis of the University of Michigan’s Ross School of Business shows what an utter failure that policy has been. Davis shows that companies that go public create very few jobs. Between 2001 and 2014, 1,600 companies went public with an IPO, but the typical company only increased its employment by 51 jobs after going public,” Nutting wrote in 2016.
It’s not hard to understand why that research makes sense. Companies don’t go public to create jobs; they do so to enable early investors to monetize their investments while gaining additional access to capital. That’s especially true when you consider how many unicorns have IPO’d in recent years.
We can look back in hindsight at Amazon’s job creation and marvel at what it’s been able to accomplish. However, how many people pay attention to these numbers in real-time?
My guess is not many.
Amazon’s Job Creation Relative to GameStop
Davis found in his research that GameStop (NYSE:GME) was one of the biggest job creators over the 14 years of his study. Never mind that most of the jobs created were minimum wage.
In 2001, GameStop had 1,400 full-time salaried employees, 1.300 full-time hourly, and between 5,000 and 12,000 part-time hourly. By 2014, it had 18,000 full-time salaried and hourly employees and between 29,000 and 55,000 part-time hourly employees, depending on the time of year.
Taking the midpoint of the part-time hourly for each year and adding them to the full-time employees (both salaried and hourly), GameStop grew its employee headcount from 11,200 in 2001 to 60,000 in 2014, a compound annual growth rate of 12.7%.
Over the same period, GME stock appreciated on a CAGR basis by 9.31%, from $10.45 to $36.35. So, it appears the correlation holds. In the seven years since then, GameStop’s employee numbers have dropped to approximately 32,000, full-time and part-time.
What’s happening at GameStop has very little to do with the company’s job creation and more to do with Ryan Cohen’s investment in the business. Before he got involved, GME’s share price followed its dwindling job total lower.
Amazon’s Share Price Will Continue to Move Higher
In 2021, Amazon added 310,000 jobs, a 24% increase from 2020. As long as the company keeps adding to its employee headcount at this accelerated rate, investors can reasonably predict its share price will follow suit.
While I’ve never been a fan of how Amazon treats its front-line workers in the warehouse and delivery vans, there’s no question that it’s adding jobs faster than most American businesses. That’s a good thing for all stakeholders, especially shareholders.
If you own AMZN or are thinking of buying, keep watching its job creation. That will tell you everything you need to know about whether it’s growing or not.
Amazon is squarely in the growth corner heading into Q2 2022.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.