Less turnover, smaller raises: Hot job market losing sizzle
Companies around U.S. are finding it easier to attract, keep workers.
Last year, Klaussner Home Furnishings was so desperate for workers that it began renting billboards near its headquarters in Asheboro, North Carolina, to advertise job openings. The steep competition for labor drove wages for employees on the furniture maker’s production floor up 12% to 20%. The company began offering $1,000 signing bonuses to sweeten the deal.
“Consumer demand was through the roof,” said David Cybulski, Klaussner’s president and CEO. “We just couldn’t get enough labor fast enough.”
But in recent months, Cybulski has noticed that frenzy die down.
Hiring for open positions has gotten easier, he said, and fewer Klaussner workers are leaving for other jobs. The company, which has about 1,100 employees, is testing performance rewards to keep workers happy rather than racing to increase wages. The $1,000 signing bonus ended in the spring.
“No one is really chasing employees to the dollar anymore,” he said.
By many measures, the labor market is still extraordinarily strong even as fears of a recession mount. The unemployment rate, which stood at 3.7% in August, remains near a five-decade low. There are twice as many job openings as unemployed workers available to fill them. Layoffs, despite some high-profile announcements in recent weeks, are close to a record low.
But there are signs that the redhot labor market may be coming off its boiling point. Major employers such as Walmart and Amazon have announced slowdowns in hiring; others, such as Fedex, have frozen hiring altogether. Americans in July quit their jobs at the lowest rate in more than a year, a sign that the period of rapid job switching, sometimes called the Great Resignation, may be nearing its end. Wage growth, which soared as companies competed for workers, has also slowed, particularly in industries like dining and travel in which the job market was particularly hot last year.
More broadly, many companies around the country say they are finding it less arduous to attract and retain employees — partly because many are paring their hiring plans and partly because the pool of available workers has grown as more people come off the economy’s sidelines. The labor force grew by more than three-quarters of 1 million people in August, the biggest gain since the early months of the pandemic. Some executives expect hiring to keep getting easier as the economy slows and layoffs pick up.
“Not that I wish ill on any people out there from a layoff perspective or whatever else, but I think there could be an opportunity for us to ramp some of that hiring over the coming months,” Eric Hart, then the chief financial officer at Expedia, told investors on the company’s earnings call in August.
Taken together, those signals point to an economic environment in which employers may be regaining some of the leverage they ceded to workers during the pandemic months. That is bad news for workers, particularly those at the bottom of the pay ladder who have been able to take advantage of the hot labor market to demand higher pay, more flexible schedules and other benefits. With inflation still high, weaker wage growth will mean that more workers will find their standard of living slipping.
But for employers — and for policymakers at the Federal Reserve — the calculation looks different. A modest cooling would be welcome after months in which employers struggled to find enough staff to meet strong demand and in which rapid wage growth contributed to the fastest inflation in decades. Too pronounced a slowdown, however, could lead to a sharp rise in unemployment, which would almost certainly lead to a drop in consumer demand and create a new set of problems for employers.
Leila and David Manshoory have struggled for months to recruit workers for their fast-growing skin care and beauty brand, Alleyoop. In recent weeks, however, that has begun to change. They have begun to get more applications from more qualified candidates, some of whom have been laid off by other e-commerce companies. And notably, applicants aren’t demanding the sky-high salaries they were in the spring.
“I think the tables are turning a little bit,” David Manshoory said. “There are people who need to pay their bills and are realizing there might not be a million jobs out there.”
Alleyoop, too, has pared its hiring plans somewhat in preparation for a possible recession. But not too much — David Manshoory said he saw this as a moment to snap up talent that the 3-yearold company might struggle to hire in a different economic environment.
“You kind of want to lean in when other people are pulling back,” he said. “You just have more selection. There’s a lot of, unfortunately, talented people getting let go from really large companies.”
The resilience of the labor market has surprised many economists, who expected companies to pull back on hiring as growth slowed and interest rates rose.
Instead, employers have continued adding jobs at a rapid clip.
“There are some signs in the labor market data that there’s been a bit of cooling since the beginning of the year, or even the spring, but it’s not a lot,” said Nick Bunker, director of North American economic research for career site Indeed. “Maybe the temperature has ticked down a degree or two, but it’s still pretty high.”
But Bunker said there was evidence that the frenzy that characterized the labor market over the past year and a half had begun to die down. Job openings have fallen steadily in Indeed’s data, which is more up to date than the government’s tally. And Bunker said the decline in voluntary departures was particularly notable because so much recent wage growth had come from workers moving between jobs in search of better pay.
Recent research from economists at the Federal Reserve Banks of Dallas and St. Louis found that there had been a huge increase in poaching — companies hiring workers away from other jobs — during the recent hiring boom. If companies become less willing to recruit workers from competitors, and to pay the premium that doing so requires, or if workers become less likely to hop between jobs, that could lead wage growth to ease even if layoffs don’t pick up.
There are hints that could be happening. A recent survey from another career site, Ziprecruiter, found that workers had become less confident in their ability to find a job and were putting more emphasis on finding a job they considered secure.
“Workers and job seekers are feeling just a little bit less bold, a little bit more concerned about the future availability of jobs, a little bit more concerned about the stability of their own jobs,” said Julia Pollak, chief economist at Ziprecruiter.