Weekly Economic & Business Outlook

Winter Chill Freezes Staffing Growth and Interest Rates

In a remarkable shift, the unemployment rate in January rate defied many expert predictions and ticked down for the first time since May 2024, from 4.1% to 4.0%. While a positive development, the accompanying JOLTS January jobs report presents a more nuanced profile, falling short of expectations for job growth. The U.S. Bureau of Labor Statistics suggests that the slowdown in job creation was in part due to weather conditions and estimates that around 570,000 people nationwide were unable to work due to bad weather in January. If accurate, this would have an impact on employment comparable to Winter Storm Uri in Texas four years ago that left millions without power and caused dangerous travel and working conditions.

The ASA Staffing Index also has captured the impact of adverse weather, recording an increase in the number of companies attributing inclement weather as a primary factor hindering staffing growth. The temporary help services sector contracted again in January, shedding around 12,000 jobs and bringing the staffing penetration rate down to 1.59%. The last time the penetration rate was this low (excluding the pandemic-related recession) was in May 2010. Although job creation is ongoing, staffing firms are capturing a smaller share of these new opportunities.

Simultaneously, consumer inflation expectations have worsened, in large part due to recent changes in trade policy. The Federal Reserve pays close attention to popular perception of price levels (as they often influence real prices). Therefore, rate cuts are on pause as the Fed feels it has little reason to cut rates now while there’s still a relatively sturdy labor market and lingering economic uncertainty, postponing the relief that lower rates will bring by increasing labor demand.

New Hires Reflect Companies Eager for Talent

Employers were more proactive in searching for talent in the fourth quarter of 2024, according to the latest ZipRecruiter Survey of New Hires, conducted among 1,500 U.S. workers who started a new job within the past six months. More than half (53%) of new hires reported having been actively recruited by their new employer, up from 29% in the Q3 survey. And previous employers aren’t letting go as easily, as the share of new hires who received a counter-offer upon giving their resignation grew from 17% in Q3 to 31% in Q4.

Money was a bigger factor for new hires in the Q4 survey, as 73% of new hires reported increasing their income in their new role, up from 57% in Q3. In addition, the share that received a signing bonus grew from 12% to 43%. New hires were going after the money; the proportion who negotiated their salary nearly doubled from 25% to 49%.

Why did new hires change jobs? Better pay was the top reason, cited by 47% of new hires (up from 35% in Q3). Likewise, better benefits increased from 18% in Q3 to 38% in Q4, leapfrogging lower stress (29%) and better management (23%).

While the labor market remained cooler than in prior years to close out 2024, these survey findings suggest at least some companies were eager to hire in Q4. However, employers will need to be prepared to compete, as pay and benefits increased in importance for new hires compared to prior quarters.