Why Companies Still Aren’t in a Firing Mood

Even as recession fears swirled last year, companies were reluctant to let workers go. What will the rising hope of a soft landing for the economy do for the job market?


Justin Lahart

Jan. 4, 2024 5:30 am ET


A lot of people spent much of last year convinced that the U.S. was on the cusp of a recession—including those in charge of hiring and firing workers.

Lately, though, with the economy continuing to grow even as inflation has been coming down, those recession worries have moderated. This might not lead to a reacceleration of job growth, but it could set the conditions for the labor market to not cool as much over the next year as many economists and Federal Reserve policymakers expect.

Economists have been lowering their recession odds lately, and so are American companies, to judge from recent earnings calls. In the fourth quarter, 239 transcripts of earnings calls included the word “recession” at least once, according to FactSet. This was the fewest since the first quarter of 2022, when the Fed had only recently begun its series of rate hikes, and well below 790 registered in the fourth quarter of 2022.

What is curious is that, even as companies kvetched about a coming recession, the economy kept adding jobs. Economists polled by The Wall Street Journal expect Friday’s employment report to show a gain of 170,000 jobs in December from November. That would equate to a gain of 2.7 million in 2023—fewer than 2022’s 4.8 million but, outside of the pandemic period, the strongest year for job growth since 2014.

One reason for this might be that, even though companies thought the economy’s prospects were bad, they didn’t judge their own prospects so poorly. A survey-based index compiled by Duke University and the Federal Reserve Banks of Atlanta and Richmond shows that CFOs’ optimism about the U.S. economy fell sharply in 2022 and only recently started showing signs of recovery. But their optimism about their own companies didn’t take much of a hit.

For employers, shedding workers when the business is doing well, even if they think a recession is coming, usually isn’t wise. A recession forecast is merely a forecast and, if the economy defies expectations, refilling jobs can be challenging. This could be part of what is behind the “labor hoarding” dynamic that has been in place in which employers have been reluctant to let workers go. The Labor Department on Wednesday reported that a seasonally adjusted 1.5 million people were laid off in November. In 2019—a good year for the job market—an average of 1.8 million people were laid off each month.