What a difference a few months can make. It wasn’t that long ago that we read about the great resignation and the lack of available employees for job openings. Now, companies are either slowing or freezing hiring for new positions and in some cases laying off staff.
Recent news headlines have featured Google, Apple, Twitter, Netflix, Spotify, Uber, Tesla, and Meta, among others announcing layoffs or slowed hiring. According to a letter to Google employees from the CEO:
“Because of the hiring progress achieved so far this year, we’ll be slowing the pace of hiring for the rest of the year, while still supporting our most important opportunities. For the balance of 2022 and 2023, we’ll focus our hiring on engineering, technical and other critical roles, and make sure the great talent we do hire is aligned with our long-term priorities. Moving forward, we need to be more entrepreneurial, working with greater urgency, sharper focus, and more hunger than we’ve shown on sunnier days. In some cases, that means consolidating where investments overlap and streamlining processes. In other cases, that means pausing development and re-deploying resources to higher priority areas.”
In the big picture, the jobs market remains strong, with unemployment still below 4%. And while technology firms are pumping the breaks, the need for lower-wage service workers hasn’t slowed down. According to Bloomberg, “For now the labor market remains tight. The jobless rate, at 3.6% in May, is historically low, and payrolls rose by a healthy 390,000 that month. Wage growth is historically high, when excluding inflation. While new job postings declined slightly in recent weeks, they remain 54% higher than before the pandemic, according to data from jobs website Indeed.”
Technology firms aren’t the only ones adjusting their hiring practices, real estate firms and financial institutions are also impacted. One thing these industries have in common is sensitivity to interest rates. Whether it’s a slowing of consumer demand due to higher rates or the cost of borrowing money for growth, executives are reassessing plans.
The current mix of higher interest rates, cooling consumer demand, and inflation at 40-year highs has economists predicting not if hiring will slow down but how quickly. Per the Bloomberg article, “In its bid to tamp down on inflation, the Fed hiked rates by 75 basis points at its June meeting — the most since 1994 — and Chairman Jerome Powell is eyeing at least a 50-basis points increase at the next meeting. That’s prompted growing recession calls from economists as consumer and corporate lending demand weakens. Powell himself acknowledged this week that a recession is possible, though not inevitable.”
There is a good chance that unemployment will grow in the coming year though we have not noticed a slowdown. Some Wall Street predictions believe it will be over 5% by the beginning of 2023. The burst of hiring that occurred as companies emerged from the pandemic last year is being countered this year by inflation and concerns of a looming recession. The fear of a softening economy has shifted focus to cost-cutting measures regardless of industry.
For more information on hiring trends, leadership, and executive search, check out our blog.