Why firms are no longer hanging on to employees

‘Labor hoarding’—holding on to employees for fear of not being able to get them back later—has reached its end

- Justin Lahart

Over the past two years, America's businesses have become increasingly reluctant to bring in new employees. BLOOMBERG

(BLOOMBERG)

Companies scrambled for years after the pandemic to build back their work-forces, learning a simple lesson along the way: Keep the workers you've got, because if you lose them you will have a hard time getting them back.

The job market has softened in recent months, however, marking a safer environment for companies to start streamlining their workforces. A host of them have pounced, including Amazon.com, United Parcel Service, Target and Meta Platforms, which have announced tens of thousands of layoffs in recent weeks.

It is a shift that could have major repercussions for U.S. workers. Over the past two years, America’s businesses have become increasingly reluctant to bring new employees on, especially as more recent uncertainty over the direction of tariffs made it harder to plan ahead. But they have also been hesitant to cut the employees they already have, an example of what economists term “labor hoarding.”

The result has been a low-hire, low-fire environment, in which recent graduates and others trying to break into the job market have struggled, but workers who are already employed have been largely insulated.

Now things are looking a bit more like the 1990s, when many big companies were focused on eliminating workers they felt were no longer needed, according to Joseph Brusuelas, chief economist at RSM.

Back then, “We used to reward companies for letting people go,” he said.