During the height of the pandemic, hungry and homebound customers clamored for Home Run Inn Pizza’s thin-crust frozen pies. The company did everything it could to comply.
It kept its machines running during its lunch break and hired help to ensure it could produce pizzas at what was suddenly a breakneck pace.
More recently, demand has slacked, and suburban Chicago-based Home Run Inn Pizza has reversed some of those moves. But there are no plans to lay off full-time manufacturing workers — even if that means there are a few more workers on the second shift than it needs.
“We have really good people,” said Nick Perrino, chief operating officer and great-grandson of the company’s founder. “And we don’t want to let any of our team members go.”
Despite a year of aggressive Federal Reserve rate hikes to curb inflation and signs that the sweltering job market is cooling, most companies have not taken the step to cut jobs. Aside from a few high-profile companies, mostly in the tech sector, like Google’s parent company Alphabet, Meta, and Microsoft, layoffs are remarkably rare in the economy as a whole, even historically.
Government data shows December saw fewer layoffs than any other month in the two decades leading up to the pandemic. Applications for unemployment insurance have hardly increased. And the unemployment rate is 3.4 percent, the lowest since 1969.
“We haven’t seen any layoffs,” said Janis Petrini, co-owner of an Express Employment Professionals recruitment office in Grand Rapids, Michigan.
For Federal Reserve policymakers The surprising strength of the labor market gives cause for optimism and concern. The low unemployment rate suggests that a recession is not imminent, but also that the Fed has failed to meet its goal of slowing the economy.
For workers, the picture is clearer: the historically strong labor market remains intact, at least for the time being.
Economists say a variety of factors could prompt employers to hold on to employees. Some may be shocked by how difficult and costly it has been to recruit and train staff in recent years. Some may worry they are understaffed when they need to quickly hire new staff after a fleeting downturn — as was the case when the economy quickly picked up again early in the pandemic. Others may still be trying to make up for staffing shortages following the turmoil of the pandemic. The leisure and hospitality industry, for example, is still about half a million jobs below pre-pandemic levels.
More fundamentally, the pandemic and resulting prolonged tight labor market may have fundamentally changed the attitude of the country’s employers towards staffing levels and hiring.
The state of jobs in the United States
Economists have been surprised by recent strength in the jobs market as the Federal Reserve seeks to orchestrate a slowdown and tame inflation.
“When the economy came back very strongly in 2020, many firms tried to rehire and they couldn’t,” said Matt Notowidigdo, an economics professor at the University of Chicago’s Booth School of Business. “That experience may still be with people.”
At Home Run Inn Pizza in Woodridge, Illinois, Mr. Perrino said attracting and retaining employees has proven exceptionally difficult, especially for shifts that can start in the early hours or last late into the night. (In addition to its frozen cake business, the company also has a handful of Chicago-area restaurants.) That, coupled with its loyalty to its employees — “I don’t think we’ve ever laid off in our company’s history,” he said — has contributed to its desire to retain its full-time employees, including 135 employees in manufacturing.
“Finding talented workers who want to stay and work for the long-term success of the company – that was a big challenge,” he said.
For some companies, particularly those in consumer-facing service sectors like leisure and hospitality, the logic for avoiding layoffs is simpler: Demand is still strong and they need the help.
John Keener, a restaurateur in Charleston, SC, said his facilities, which include two Charleston Crab House locations and AW Shuck’s Seafood Shack, have been virtually understaffed since the early days of the pandemic.
To attract employees, he raised wages, offered more generous benefits and began posting open positions on LinkedIn, Yelp, Facebook and Instagram, he said. When that wasn’t enough, he figured out how to work with less, changing menus so he had fewer prep cooks and giving waiters portable electronics so they could beam orders straight into the kitchen without leaving the floor.
But as the all-important spring tourism season begins, he’s more desperate than ever to hire additional staff — 50 if he gets his wish, which would bring his total to about 270.
“We’ve been talking about a recession since the beginning of last summer and if we start worrying about it and anticipating it, we’re going down the wrong rabbit hole,” he said. “We just keep going.”
Continued strength in consumer demand — and the continued hiring that has resulted from it — has angered Federal Reserve policymakers. Fed officials worry the strong labor market is contributing to inflation as employers raise wages to attract scarce labor and then hike prices to meet their higher labor costs. That could force the central bank to hike rates even more aggressively, ultimately increasing the risks of a painful recession.
But the low layoff rate also points to a rosier scenario. Higher interest rates usually mean higher costs and weaker sales, which often leads to layoffs. If companies instead respond by cutting hiring or raising salaries while retaining existing employees, it could cause the labor market to cool without widespread job losses.
There are signs that something is happening. In phone calls and investor presentations in recent months, company executives have begun talking about their efforts to cut costs and curb spending, even in cases where their own sales remain strong. Some have imposed hiring freezes, cut bonuses, or restricted the use of contractors. So far, however, they have usually not resorted to mass layoffs as in the past, says Julia Pollak, chief economist at the job portal ZipRecruiter.
“The biggest story is the lack of layoffs — the lack of the layoffs you would normally see in response to higher interest rates,” she said.
This anomaly was evident with Grow Therapy, an online service that helps patients book appointments with therapists who accept their insurance. The company quickly hired new staff to meet the demand that was expected months later. But the company’s growth depended on venture capital funding — and venture capital funding was to become far more difficult and expensive.
As a result, Grow Therapy imposed a temporary hiring freeze on most positions in May. Rules have also been introduced requiring all co-founders to opt out before anyone can be hired for roles not covered by the freeze. To meet short-term staffing needs, the company turned to an outside temp agency rather than hiring full-time staff.
One thing Grow Therapy never seriously considered was laying off employees, said Jake Cooper, co-founder and chief executive officer. Demand is still strong and growing, Mr Cooper said. And the company expects to continue hiring going forward — something that could become more difficult if it cut jobs now.
“There’s a risk of a death spiral where if you lay off a large chunk of your staff, everyone who’s left is less happy and overworked,” he said. “When you’re laying off, it’s hard to quantify, but it’s certainly harder to recruit highly qualified candidates.”
But economists warn that while companies are holding on to their workers, that could quickly change if abstract fears of a recession turn into actual sales slumps. Economists warn that if a recession hits, it will almost certainly force companies to cut jobs en masse, no matter how hesitant they may be after their recent experience of a tight labor market.
“That’s the risk,” Mr Notowidigdo said, referring to the companies’ strategy of retaining workers even when business slows. “They could end up with multiple rounds of layoffs going forward if the recession turns out to be more severe than expected.”
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