Could the U.S. labor market finally be cooling off?

All of the official statistics tracking labor market—from jobless claims, to payrolls, to openings—indicate that demand for labor remains sky-high and supply is still constrained.  This has led investors to rethink the idea that the Federal Reserve is poised to implement just two more quarter-point hikes before pausing, with market indicators suggesting the Fed now has at least three-quarters of a point to go before pausing.

Yet there are some emerging signs that the labor market may be cooling off. ZipRecruiter, the online hiring platform, announced its fourth quarter results on Wednesday.  Although revenue beat expectations, it was down four percent compared with the fourth quarter of the prior year. Management pinned the blame on a hard comparison to the hiring boom of the fourth quarter of last year and “a continued softening in the hiring market.”

Perhaps even more important, ZipRecruiter’s management said it expects sales in the first quarter to be down between 23 percent and 20 percent from last year’s level and for full year sales to decline between 13 percent and 15 percent.

In the conference call discussing the results, chief financial officer Tim Yarbrough said:

In June of 2022, we saw in the beginning of what would prove to be a persistent decline in the number of jobs posted. We now start 2023 with an increasingly difficult macroeconomic backdrop. Employers have been decreasing their willingness to pay for hires, and many companies are executing layoffs as they tighten budgets. Rather than showing a more typical seasonal rebound from the lows of the December holiday period, we saw online job postings in our marketplace remain depressed.

Chief Executive and co-founder Ian Siegel had a similar message:

And I just want to start by saying some things as plainly as possible, which is, clearly, we’re in a macroeconomic slowdown. And online recruiting has effectively cooled across the country, especially among SMBs. So if you look at other job companies at our scale, they’re delivering the same message that we’re delivering today. And similarly or correspondingly to what you would expect from a macro slowdown, we are seeing a surge in job seekers. When there are less jobs, it’s going to take these job seekers longer to find work and that is, in fact, what we are seeing. So based on that backdrop, we made the assumption using the information that was available to us at the time from January that there’s going to be a softer hiring environment throughout 2023.

It’s not just ZipRecruiter who is seeing these signs of a slowdown. Two weeks ago, Rand Ghayad, head of Economics and Global Labor Markets at LinkedIn, said in a post on the site that hiring through the employment-focused social media site sank 23 percent year over year in the U.S. in January and down 0.7 percent compared with December.

Shares of ZipRecruiter fell 26 percent on Wednesday. Year-to-date, the stock is up by 4.1 percent.