By Jon Hilsenrath


March 1, 2023 5:30 am ET

Demand for U.S. workers shows signs of slowing, a long-anticipated development that is showing up in private-sector job postings even while official government reports indicate the labor market keeps running hot.
ZipRecruiter Inc. and Recruit Holdings Co., two large online recruiting companies, say their data show the number of job postings is declining more than Labor Department reports of job openings. Investors recently hammered shares of those companies after disappointing earnings reports.
Robust government data on job openings and hiring are among the reasons Federal Reserve officials believe the U.S. economy is overheated, fueling high inflation. Fed officials are raising interest rates in an attempt to slow growth and reduce price pressures. If government reports move in line with the recruitment business, Fed officials could feel less pressure to move aggressively.
The Labor Department next week will report job-opening figures for January and payrolls for February. It tallied the number of available jobs in December at 11 million, 57% above levels in February 2020, right before Covid-19 hit the economy. The number ticked up in December after drifting lower in earlier months.
Hiring surged in January, the Labor Department also reported, as restaurants, hospitals, nursing homes and child-care centers staffed up, more than offsetting cuts announced by employers such as Inc. and Microsoft Corp.
The data from Recruit Holdings, the parent company of U.S. job-listing site Indeed, and ZipRecruiter, tell a somewhat different story. ZipRecruiter said its job postings in December were 26% above pre-Covid levels and fell further in January.
Indeed also showed a greater drop than the government figures, though not as stark as ZipRecruiter found. Indeed’s data show that companies are cutting back in particular on sponsored job postings, the kind they pay for, meaning they have been less willing to invest heavily to fill open positions.
Other private data also point to a decline in available jobs. The National Federation of Independent Business, which represents small businesses, and LinkUp, a research firm that tracks job listings that companies place on their own websites, also show a sharper drop in postings than recent government reports on openings.
“Clearly, we’re in a macroeconomic slowdown, and online recruiting has effectively cooled across the country,” Ian Siegel, chief executive of ZipRecruiter, said in a conference call last week.
ZipRecruiter’s weak quarterly revenue numbers sent its share price down more than 20% in a day. “We are seeing a surge in job seekers,” Mr. Siegel said. “When there are less jobs, it’s going to take these job seekers longer to find work and that is, in fact, what we are seeing.”
The firm told investors it is preparing for a softer hiring environment for the rest of the year.
The Fed is trying to slow the labor market. It has been raising short-term interest rates to cool household and business spending, which Fed officials hope will reduce labor demand and inflation. The Fed hopes to slow the economy and inflation just enough, without also spurring outright firing of workers and sharply higher unemployment.
“We are seeing a decline in employers’ willingness to spend to hire in many industries despite the labor shortage as they become increasingly cautious due to a potential recession in the U.S.,” Hisayuki Idekoba, chief executive of Recruit Holdings, said in a February call.
As interest rates rise and companies tighten their belts, white-collar workers have taken the brunt of layoffs and job cuts, breaking with the usual pattern leading into a downturn. WSJ explains why many professionals are getting the pink slip first. Illustration: Adele Morgan
Tracking available jobs is complicated. The Labor Department’s monthly Job Openings and Labor Turnover survey asks employers about unfilled positions that they are actively recruiting to fill. This survey isn’t as thorough as other federal surveys. It is based on reporting from 20,700 firms. By contrast, the Labor Department’s monthly payroll survey is based on reporting from 122,000 businesses and government agencies, representing approximately 666,000 individual worksites.
The reliability of the Labor Department’s job-openings estimates has declined in recent years because fewer businesses have been responding to survey questions, said Paul Calhoun Jr., an economist at the Labor Department. The response rate for the survey fell to 30.6% last September from 56.4% in February 2020. The department increased its sample size in 2019 because of the declining response rates.
Private sector postings aren’t as focused on active searches, but the sample sizes are much larger, lending credence to their findings.
“We haven’t seen [the slowdown] in the employment data yet, but we will see it soon,” said Julia Pollak, chief economist at ZipRecruiter. “We also speak to customers all of the time. We discuss with them their plans for future hiring. They are telling us they are worried about the risk of overhiring.”