Weekly Economic & Business Outlook

What Sales Mean for Labor Churn

Last week’s special edition of WEBO focused on labor churn showed that workers are slowly regaining their appetite for finding new opportunities in the labor market. Yet, their willingness to seek new employment is only half of the labor churn puzzle; their willingness to actively seek new employment is conditional on demand for new talent by employers. Hence, this next installment will consider the issue of labor churn from the perspective of employers, specifically, their timeline for adding headcount.

Since 2022, job growth has steadily contracted due to increased labor costs because of higher inflation and interest rates. In April alone, nonfarm payroll employment growth fell to 175,000—a healthy figure itself, but nowhere near the peaks seen in prior years. Part of the reason job growth has not observed further deterioration is due to changes within the employer-employee relationship fostered by the Great Resignation that encouraged companies to be more competitive when attracting and retaining talent.

However, job growth is also stable because it is supported by expectations for continued growth among companies. Most businesses have seen a trough in their unit sales, which could signal an impending, albeit gradual, rebound that supports further hiring in the long term. This trough is most pronounced among small businesses which comprise nearly 50% of private-sector employment. Among mid-sized and large firms, continued stability would provide firms with the necessary confidence to make bolder hiring decisions. While sales, much like worker sentiment, will depend on the eventual course of monetary policy and its consequences on economic activity, their current trajectory makes a strong case for optimism about future labor churn, and the talent demand that could soon face staffng companies.

Employers Are Stepping Up Their Hiring Game

The ZipRecruiter Survey of New Hires—conducted on a quarterly basis among individuals who started their jobs within the prior six months—sheds light on what new hires are encountering in the job market. The latest data suggests the job market continued to cool in 1Q2024, but also emphasized the vitality of recruiters during periods of reduced turnover within the labor market.

A slower job market is evident, as it is taking longer for workers to find jobs. In 1Q2024, 46% of new hires had found their job in under one month, down from 60% in 4Q2023. Slightly fewer reported receiving a hiring bonus in 1Q2024 (23%) than in 4Q2023 (29%), though the number who negotiated their offers edged up slightly in 1Q2024 (43%) from 4Q2023 (40%).

However, despite a slower job market, businesses are putting effort into recruiting when they need talent. Nearly half of new hires (46%) indicate they were recruited, up sharply from 34% in 4Q2023. The share of new hires reporting their employer made a counteroffer edged up to 24% from 21% in 4Q2023. Employers are responding promptly to applications—nearly half (48%) of new hires report that their new employer responded to their application within three days, and nearly all (92%) had heard back within about a week.

Two competing trends are evident—the job market has cooled down, and it is taking longer for workers to find new jobs. However, companies that are hiring are doing so proactively, and those looking to fill roles need to be proactive in getting talent.