Have We Reached a Peak Job Market?

Not long ago, many people were concerned that the US economy grew only 366,000 jobs in August. They've gotten more concerned now, as the government reported Friday that nonfarm payrolls increased by only 194,000 in September. 

On the back of two mediocre months, there’s growing suspicion from some experts that the country’s pandemic-led job boom has peaked. There may be nearly 11 million open roles, but there are only about 8.4 million people who want a job and don’t currently have one. Meanwhile, numerous organizations have slowed down their hiring because they are experiencing higher production costs and are leery of adding more labor expenses. Even the government’s own forecasters believe job growth will slow down. Excluding refilling roles that were forced open by the pandemic, the number of US jobs is expected to grow 1.7% in total from now until 2030, according to the Bureau of Labor Statistics.

If the end of the jobs boom is indeed near, then organizations may start rethinking not only the compensation packages they’re offering but also some pandemic-era benefits, such as flexible schedules and remote-working options. “Companies might not have to give away the store to find talent,” says Elise Freedman, a Korn Ferry senior client partner and leader of the firm’s Organizational Strategy and Workforce Transformation practice.

Indeed, real-time indicators suggest September was not a great month for hiring. Companies across the country that were expecting big sales jumps are now saying that growth will be more modest. Supply-chain bottlenecks are a big holdup, but firms are increasingly saying they can’t find workers. In Texas, for example, more than three-quarters of businesses surveyed last month by the Federal Reserve Bank of Dallas said a lack of applicants was impeding their ability to hire. While it’s common for companies to complain about a lack of qualified applicants in any job market, organizations may have hit a wall after the recent hiring binge.

Experts say organizations likely will evaluate whether they want to rein in the salaries that they’ve been paying out to new hires. Some new recruits are getting paid more than people who’ve already been doing the same job at the same company. Returning salary offers to pre-pandemic levels may not be realistic (the job market isn’t falling off a cliff), but instead of offering 10% to 20% bumps, companies can dial them back to 5% or whatever the average wage increase was for people who started new jobs from 2017 to 2020.  At the same time, organizations may put a renewed emphasis on campus recruiting and recruiting early-career employees, says Jacob Zabkowicz, vice president and general manager for Korn Ferry’s Recruitment Process Outsourcing business.

Then there are the benefits. Many bosses, eager to bring as many people back to the office as possible once the pandemic eases, likely will be happy to eliminate offering a remote-work option to new recruits. Freedman says instead of just throwing money at a variety of benefits organizations should survey their employees and find out which benefits they really care about.

To be sure, there are plenty of industries that aren’t putting away the help wanted signs (trucking, for instance). Zabkowicz says things will slow down eventually, but his clients are all hiring en masse. Even when the market does cool top talent likely will be tough to find and expensive to recruit regardless of the overall market.

Importantly, companies shouldn’t suddenly pull back on the commitments to training and employee development they may have made during the job boom, Freedman says. Those benefits often pay for themselves because they increase employee productivity, lower employee attrition, or both.