Is the Job Market Headed for a Dip?

The labor market, which has been a pillar of economic strength, is showing signs of deterioration.


Job growth is slowing, unemployment claims are rising, and several major corporations, like Apple and Meta, are delaying their hiring plans. There are indicators that more companies are cutting employees in fields as diverse as technology, advertising, health care, finance, and law.


A Time of Mixed Signals.


According to the most recent Labor Department statistics, US firms added 372,000 jobs in June. That is significantly more than the 250,000 new jobs predicted. The unemployment rate has also remained stable at 3.6% – close to a five-decade low. That’s the good news. 


Unfortunately, the bad news is that, according to the May Job Openings and Labor Turnover Survey (JOLTS), job openings fell by 427,000 to 11.3 million, with the professional-services and manufacturing industries suffering the most. In April, that figure fell by 455,000 to 11.4 million. 


Overall, job postings have decreased by 500,000 since reaching a high of 11.8 million in March. Hiring dipped from 6.6 million to 6.5 million between April and May, though not as dramatically. 


Initial unemployment claims have also risen in recent weeks, as a wave of layoffs has already struck sectors such as technology, finance, and real estate.


What This Means.


Following the acquisition of a rival chain, convenience store chain 7-Eleven laid off 880 corporate staff in Texas and Ohio, according to an email from a company representative. According to Bloomberg News, Ford plans to lay off 8,000 workers. Meanwhile, electric vehicle manufacturer Rivian is laying off 700 employees, delivery startup Gopuff is laying off 1,500, and mortgage lender LoanDepot is laying off 4,800 this year, according to sources.


“What was once universally optimistic job market news has obviously become less so,” said Liz Ann Sonders, managing director and chief investment strategist at Charles Schwab. “Anecdotes of employers laying off staff, halting hiring, or reducing job ads are starting to pile up.”


According to Julia Pollak, a labor economist at ZipRecruiter, the number of active job posts across numerous online platforms has been declining for five weeks in a row.


Meanwhile, first-time claims for unemployment benefits increased by 7,000 in June and were up 51% since mid-March, However, they do remain near historic lows, according to Labor Department data.


There are Definite Signs of a Dip Ahead


Vacancies continue to outweigh available workers by a factor of two, but evidence suggests that businesses are becoming more hesitant to hire, according to Jeanne MacDonald, head of Korn Ferry’s Global Recruitment Process Outsourcing (RPO) Solutions unit.


Companies are rethinking their labor needs with greater prudence and thought,” she says.


According to Jacob Zabkowicz, vice president and general manager of Korn Ferry’s global RPO division, the uncertainty has encouraged some businesses and employees to prioritize internal mobility over hiring and firing. On the employee side, he says, those who did not take advantage of the previous year’s golden labor market are wondering if they lost out. “Now might not be the best time to move,” Zabkowicz says. He claims that organizations are taking a wait-and-see strategy to fill open positions.


Despite this, there are still some people willingly leaving their positions. In May, 4.3 million people quit, a 100,000 decrease from April. Quit rates first surpassed 4 million per month in June 2021 and have not dropped below that level since, peaking at 4.5 million in November 2021. According to Alan Guarino, vice chairman in Korn Ferry’s Board and CEO Services unit, consistent departure rates highlight the fact that it’s still “a seller’s market for top people.” 


Companies are still looking for exceptional performers and will always have room to hire them,” Guarino says.


It’s Not All Bad News – Yet


Whether or not the broader employment market has peaked, experts feel talent still has an advantage. Hiring for digital and technically trained professionals, for example, is strong across all industries. However, it is unclear how long this will continue. Several factors are interacting to potentially make the second half of 2022 more advantageous for employers. 


One is high inflation, which, by reducing spending power and eating away at savings amassed during the pandemic, is already forcing people back to work, according to Guarino. Another factor is the labor market’s tightness, which will almost certainly force the Federal Reserve to continue hiking interest rates. This might tip the economy into a full-fledged recession, which would have a huge impact on hiring.


Almost all of the 20 million jobs lost in the first few weeks of the pandemic have been restored. Employers in the United States have added more than 6 million jobs in the last year alone, and job opportunities continue to outnumber job seekers by nearly two to one in May.


However, a larger slowdown in other areas of the US economy is beginning to have an impact on the labor market.


The most noticeable slowdown has been in the IT industry, which grew rapidly during the pandemic. According to LinkedIn data, IT hiring dropped 9.1%  in June, compared to a 5.4% drop across all industries.


The number of layoffs at tech corporations and start-ups has increased in recent weeks. Netflix, Tesla, and Coinbase have all declared layoffs or hiring freezes.


Vimeo, the online video platform and former tech darling, revealed this week that it was laying off 6% of its workforce.


“We are making this decision to guarantee that we emerge from this economic slump as a better company,” said Anjali Sud, the company’s CEO, in a memo to employees. “The reality is that the difficult economic conditions around us have had an influence on our business.” We must anticipate that these conditions will continue to be difficult for the foreseeable future, and that we will not be immune.”

Final Thoughts

Fears of a recession might become self-fulfilling: If people and businesses begin to withdraw because they are concerned about their financial futures, this can be enough to precipitate a slump. Until now, Americans have continued to spend extensively on services, as well as food, gas, and other needs, despite rising prices. However, analysts caution that this may quickly change if job losses increase — or if Americans decide to limit spending because they fear losing their employment.