Recruiting

Employers Cutting Back on Hiring Despite Tough Labor Market

For well over a year now, the big story in the labor market has been the Great Resignation and the tremendous difficulty so many employers have been having finding qualified and engaged workers. Restaurants have had to cut back on hours and days of operation, airlines have had to cancel routes, and job openings in businesses of all types have gone unfilled for months on end.

It may be surprising, then, that many employers have instituted hiring freezes and even employee layoffs, but that’s what we’ve been seeing recently.

Slowdowns During the Great Resignation?

“A steady trickle of headlines announcing hiring slowdowns, freezes, and layoffs at familiar and successful companies such as Netflix, Walmart, Meta, Wayfair, and Microsoft could be the early signs of job cuts later this year or into next,” writes Paul Bergeron in an article for the Society for Human Resource Management (SHRM). “Troubling economic data and trends led by inflation, rising interest rates and reduced consumer retail spending has executives eyeing moves to preserve cash flow and minimize expenses. The U.S. workforce has been through this before, as recently as 2020 when the COVID-19 pandemic led to unprecedented job layoffs and significant workforce distress.”

Getting the Right People on Board

One explanation for the seeming contradiction between a tight labor supply and widespread layoffs and hiring freezes is misalignment between the workers companies have and the workers they believe they need. A company may have a very well-staffed team in an underperforming division but have trouble finding new workers in a division experiencing strong growth, for example.

Other companies may have simply decided to wait out the tight labor market. Rather than settle for whatever workers are available, they’ll simply hold off on hiring until labor market conditions are more favorable.

Keeping an Eye on Environmental Changes

The more pessimistic reading, however, is that many employers are expecting an imminent economic downturn, and they’re trying to lean up in advance. In other words, these employers expect the economic environment that caused—among other things—the current labor market shortage to change and the demand for labor to fundamentally shift in the not-so-distant future.

Lin Grensing-Pophal is a Contributing Editor at HR Daily Advisor.