The November jobs report was a blowout number, and the U.S. labor market remains strong, but behind the scenes at some of the largest U.S.-based corporations, expectations about the number of job openings and pace of hiring in 2020 have come down. Sixty percent of chief financial officers say a head count reduction will be the most likely staffing trend for their companies over the next 12 months, according to the CNBC Global CFO Council survey for the fourth quarter 2019.
CFOs are not pessimistic on the economy. The Q4 CNBC survey finds a minority — only 15% of U.S. CFOs — think a recession will occur next year. Their fears about U.S. trade policy as the biggest risk to their business have declined (15% cited trade as the biggest external risk this quarter). But there are reasons the biggest employers may be poised to pull back on staffing, according to economic and labor market experts. And there are a few key recent market numbers that support the negative jobs forecast.
While the November nonfarm payroll report showed U.S. companies adding way more jobs than expected across many sectors and the unemployment rate ticked back down to 3.5%, the lowest since 1969, jobs platform Glassdoor pointed to another November key reading from its labor market tracking: the largest employers (5,000 employees+) have cut back on job openings in the year-over-year period through November by 6%.
“Job-openings growth in the last year or so has been slower for large employers,” said Daniel Zhao, senior economist and data scientist at Glassdoor. Zhao said of the 6% decline in November: “It stumbled well below the trend.”
North America was the only of the three regions in which CFOs were surveyed by CNBC where the majority of CFOs expect head count to go down.
The Glassdoor economist said job openings are a more forward-looking indicator than the monthly nonfarm payroll report, and there are times during economic cycles when there is “a little disconnect between job growth and job openings … an inflection point between these two that shows employment growth going down.”
Jobless claims reported on Thursday were at highest level since 2017. A sudden rise, if it persists, is a warning on the economy, even with a good monthly jobs report. Claims are viewed as more real time and an early warning indicator.
But Zhao and other experts do not expect a major turn in the labor market trend.
Gad Levanon, chief economist, North America, for The Conference Board, said the November report was probably an outlier — if it did make most economists a little more optimistic — but his prediction remains moderate to slowing employment growth next year, but still a positive growth rate.
“I would be surprised if we had fewer workers next year than now. That would be a major development,” Levanon said. “Not only has head count never gone down in this expansion, I don’t think it has ever gone down in any expansion. In almost every case it has to be a recession for the annual count of jobs to go down. The general trend is up; there is just more work to be done in almost every company.”