Hiring in corporate America is slowing down and economists don’t agree on what it means for 2024

AMANDA KAVANGH | THIS COLUMN WAS CREATED BY JOBBIO
·5 min read
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Hiring in corporate America has cooled. On an individual level that might sound like cause for alarm, but it’s also in line with the Federal Reserve’s battle against inflation.

According to the latest Job Openings and Labor Turnover Summary data from the Bureau of Labor Statistics, 2023 closed with nine million job openings on the last business day of December, down from a series high of 12 million in March 2022.

It was at this peak that the Federal Reserve began raising interest rates to tackle rising consumer prices, and the knock-on effect of this is a slower labor market.

Interest rates are expected to fall this year, which is good news for individuals and businesses who have struggled with rising borrowing costs, and indicates that inflation may fade without the much-predicted recession following it.

Recession fears

Since easy funding halted with rising interest rates, and post-pandemic layoffs began, both CEOs and economists have all warned of the potential of a looming recession.

A continuous drive towards efficiencies and leaner teams were often cited as companies shed considerable percentages of their staff.

In tandem with the latest figures, the unemployment rate of 3.7 percent is up from a low of 3.4 percent in April 2022, and further cooling is expected.

Mark Hamrick, senior economic analyst at Bankrate, suggests that recent data suggests a soft landing for the American economy this year, but also says a mild and short recession can’t totally be ruled out.

While Citi Research’s U.S. economists Veronica Clark and Andrew Hollenhorst predict that job openings will fall sharply this year due to the lagged impact of the Fed’s interest rate hikes.

Yet considering how the economy expanded strongly in the second half of 2023, Ben Ayers of Nationwide highlights that the Fed would like to see continued cooling off of labor demand, which will drive softer consumer spending and overall inflation.

“There are signs on the margins that the restrictive policy stance that the Fed has had in place for much of the last year is starting to achieve that, but in many ways, the process continues to play out more slowly than expected,” he says.

Ultimately, the top level figures for the labor market have remained very solid. At the end of 2023, there was an uptick in job openings, with more than 200,000 job gains in December, and competitive salaries on offer.

The labor market remains very tight in many sectors where the demand far exceeds the supply of workers.

All positive things in normal circumstances, but this does mean that inflation could remain an issue through 2024 as consumer spending remains buoyant. And if high interest rates and tight credit continues, businesses will continue to cut workforces.

Consumer confidence is also mixed

Early indicators of consumer confidence are on an upward trajectory. The Conference Board Consumer Confidence Index rose in January to 114.8, up from a revised 108.0 in December.

This reading was the highest since December 2021, and marked the third straight monthly increase.

While the perceived likelihood of a US recession over the next 12 months dropped from 73 percent saying “somewhat likely” and “very likely” in May 2023, to 66 percent in January 2024, two-thirds is still pretty high.

For now, cautious optimism seems to be the name of the game.

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