As labor market uncertainty continues, more employees are staying in roles they would have left previously. The fear of leaving is greater than the fear of staying in a role that isn’t fulfilling. In a sense, it is the devil you know versus the devil you don’t know. And there is a new term for employees staying at companies, job-hugging.
The term was coined by Korn Ferry in a recent article. The trend has both positive and negative implications for companies. According to Korn Ferry’s Sr. Client Partner Matt Bohn, “To be sure, the job market has consistently cycled through stagnation jags for decades. But this time around, a sense of global events as unpredictable and unprecedented, combined with looming AI disruption, is making workers increasingly unsure—which can lead them to stay in holding patterns, rather than developing their skills and careers. Their torpor, in turn, blocks up-and-coming employees.”
The Bureau of Labor Statistics data shows that job growth slowed substantially in the last quarter, with only 73,000 jobs added in July, down 34% from the same period the previous year. The quit rate has hovered around 2% this year, its lowest non-pandemic level since 2016.
Employees have heard stories and know the job search process is a slog. For those looking, there is a lack of confidence in available jobs. Per ZipRecruiter, 38% of job seekers are “not confident at all” that there are plenty of jobs out there. Even passive job seekers are hesitant to change companies, fearing a last-in, first-out scenario if the new company reduces staff.
Another reason for the continued stagnation is higher interest rates. When rates are high, companies are less inclined to borrow the capital required to expand. According to Bohn, “There’s quite a bit of uncertainty in the world — economic, political, global — and I think uncertainty causes people to naturally remain in a holding pattern.”
With a global economic slowdown, it’s no surprise that job growth has dropped sharply. Federal data shows the ratio of job openings to unemployed people is nearly 1:1, half of what it was in 2022. And, according to a Conference Board quarterly poll, just over a third of CEOs plan to shrink their workforce in the coming year.
The fear of employees coasting in their responsibilities is a valid concern. Companies can benefit from job-hugging. With fewer people leaving, recruiting costs are lower, training and development costs are also down, and matching outside salaries is less common. Additionally, top performers are not leaving at the same clip, enabling organizations to continue to develop their talents and build a strong internal leadership program.
While job-hugging is considered a safe strategy in this labor market, employees could be sacrificing earnings potential by staying put. They could also lose out on opportunities to learn new skills or take on additional responsibilities.
Now is an excellent time for executive leadership and HR teams to assess the culture and consider current employee development initiatives. With a more tenured staff that is averse to leaving, soliciting their input for an improved development program could become a competitive advantage when the job market opens up again. Instead of losing your top talent, you could be an attractive destination for those who are actively looking again.
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