Is the Job Market Headed for a Dip?

It’s not an employer’s market… yet. Mixed data makes experts wonder if we're headed that way.

It was a week of mixed signals for the job market. The number of people hired was higher than expected. But the number of job openings fell nearly 7%. Can you feel the air of uncertainty?

US employers added 372,000 jobs in June, according to the latest Labor Department, released Friday. That's far more than than the 250,000 new jobs forecast, and the unemployment rate stayed held steady at 3.6%, near a five-decade low.

However, the Job Openings and Labor Turnover Survey (JOLTS) for May shows that job openings decreased by 427,000 to 11.3 million, with the professional-services and manufacturing sectors hit the hardest. In April, that number dropped by 455,000 to 11.4 million. All told, job openings have fallen by 500,000 since their peak of 11.8 million in March. Hiring also fell during between April and May—though not as precipitously—to 6.5 million from 6.6 million. Initial jobless claims also have been trending higher over the past several weeks, as a wave of layoffs has already hit sectors like technology, fintech, and real estate. 

Vacancies still outnumber available workers by a margin of 2 to 1, but the data suggests that organizations are starting to show some hesitancy in hiring, says Jeanne MacDonald, president of Korn Ferry’s Global Recruitment Process Outsourcing (RPO) Solutions business. “Companies are reconsidering their labor needs with more caution and more thoughtful decisions,” she says. 

The uncertaintly has prompted some organizations and workers to focus more on internal mobility than on hiring or leaving, says Jacob Zabkowicz, a vice president and general manager of Korn Ferry’s global RPO business. On the employee side, he says, people who didn’t take advantage of the golden labor market of the last year are questioning whether they missed out. “Now may not be the best time to move,” says Zabkowicz. When it comes to backfilling open roles, he says, organizations are taking a wait-and-see approach. 

People are still willingly leaving their jobs, however.  In May, 4.3 million people quit, a decline of 100,000 from April. Quit rates first cracked 4 million per month in June 2021 and haven’t fallen below that benchmark since, reaching a high of 4.5 million in November 2021. Alan Guarino, vice chairman in the Board and CEO Services practice at Korn Ferry, says steady quit rates underscore the fact that it’s still “a seller’s market for top talent. “Companies are still seeking high performers, and will always have room to bring them on the payroll,” says Guarino. 

Whether the overall job market has peaked or not, experts believe talent still has the upper hand. Hiring for digital and technically skilled workers remains strong across all sectors, for instance. How long that will continue is an open question, however. Several factors are working together to make the second half of 2022 potentially more favorable for employers. One is high inflation, which—by cutting into spending power and eating away at savings built up during the pandemic—is already pushing people back to work, says Guarino. Another is the tightness of the labor market, which will likely prompt the Federal Reserve to continue raising interest rates. That could tilt the economy into a full-blown recession, which would significantly affect hiring. 

For now, Zabkowicz advises employers to focus on keeping attrition low by taking care of their top performers and most loyal employees. In the face of a possible recession, he cautions against doing anything rash—cutting back on bonuses or merit increases, for example, or forcing people back to the office five days a week. “Hiring volumes are directly tied to attrition,” says Zabkowicz, “and companies are in a good spot now to control attrition.”