Long-Robust U.S. Labor Market Shows Signs of Cooling Private-sector readings show job postings receding more than government reports of job openings
By Jon Hilsenrath and Bryan Mena
Wall Street Journal
March 1, 2023 5:56 pm ET
Demand for U.S. workers shows signs of slowing, a long-anticipated development that is appearing in private-sector job postings even while government reports indicate the labor market is running hot.
Figures from ZipRecruiter Inc. and Recruit Holdings Co., two large online recruiting companies, show the number of job postings on their sites declined more late last year than the Labor Department report on job openings for that period indicated. The companies report available jobs fell further this year, potentially foretelling a decrease in openings in coming Labor Department reports, and a slowdown in hiring this year.’
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. Openings rose in December and hiring surged in January, the department reported, as restaurants, hospitals, nursing homes, and child-care centers staffed up.
Those gains pointed to a still strong labor market despite layoff announcements from large employers in technology, finance, and other industries. Facebook parent Meta Platforms Inc., Google parent Alphabet Inc., and Microsoft Corp. have moved to trim their workforces this year.
Recruiting-company figures on available jobs are more timely than government reports, which lag by about a month. The measures typically move in the same direction over time, but not at the same magnitude. Economists look at the gauges of labor demand for clues about future hiring.
The Labor Department reported 11 million available jobs in December, 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. Openings peaked at 11.9 million in March 2022.
Recruit Holdings, the parent of U.S. job-listing sites Indeed, and ZipRecruiter showed a more stark pullback. ZipRecruiter said its job postings in December were 26% above pre-Covid levels and fell further in January and February.
Indeed also showed a greater drop than the government figures, though not as much as ZipRecruiter. Indeed’s data show that companies are cutting back in particular on paid job postings, 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.
“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.”
Technology and finance fields have had among the largest pullbacks in job listings, according to ZipRecruiter. Technology job listings returned to pre-Covid levels last month after being almost 90% above that mark in May 2022. In finance, listings are below pre-Covid levels after being almost 80% above in late 2021.
Online recruiters’ share-price performance source: FactSet
Recruit HoldingsZipRecruiterFeb. 1Feb. 28-20-100102030%
On the other hand, postings in retail and travel were 25% above pre-Covid levels in February and government job postings are 54% above those levels.
“We’re seeing a pretty large pullback almost everywhere except personal-care services and healthcare,” Ms. Pollak said. “But even those businesses are cautious and nervous and they’re being quite conservative. They’re mostly hiring for replacement and not headcount growth.”
ZipRecruiter’s weak quarterly revenue numbers sent its share price down more than 20% in a day. “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.
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
“We are seeing a surge in job seekers,” he 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, wage pressure and inflation. The Fed hopes to slow the economy and inflation just enough.
Reductions in postings could signal it is achieving that goal. However, if that trend cascades into widespread layoffs, then the Fed’s desired slowdown could turn into recession and rising unemployment.
Several factors will affect the outcome, including the effects of high interest rates and whether business leaders believe they need to let go of existing workers to control their costs.
“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.
Tracking available jobs is complicated.
Private companies report based on listings on their sites and others that they monitor. The Labor Department’s measure is slightly different. The monthly Job Openings and Labor Turnover survey asks employers about unfilled positions that they are recruiting to fill. Companies can recruit through word-of-mouth, job fairs, and help-wanted signs, and not necessarily create a posting online.
That 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.