Unemployment rate rises: Businesses ‘burnt’ by Covid hiring spree rethink strategy

As the jobs market slows down, the number of applications per job is increasing, leading to intensified competition for roles. Photo / 123RF

Businesses are exercising more caution when it comes to staff recruitment following a period of unsustainable hiring and wages as ongoing economic challenges continue to bite, new data shows.

Recruitment software platform JobAdder’s latest State of Market reports, covering the second half of 2023, revealed a slowing jobs market with intensified competition for roles.

It also showed a boom in temp and contract hiring last year versus a drop in permanent placements.

“Businesses are being more cautious in their hiring strategies and taking more time to evaluate their hiring needs after becoming burnt from the urgent hiring spree that followed the pandemic,” said JobAdder CEO Martin Herbst.

“Many businesses [have] found the recent hiring surge to be unsustainable both in wages offered and the company’s long-term needs.

“Over-hiring also appears to have occurred, leaving businesses with a surplus of staff as work slows.”

That surplus, in part, could be playing a role in the swath of job losses announced over recent months.

“While it’s tempting to associate job losses solely with the hiring boom, it goes hand in hand with unexpected impacts in the macroeconomic landscape,” Herbst said.

“Last year’s dampening economic conditions and the changing geo-political environment have undoubtedly left their mark.”

According to JobAdder’s data, the average number of jobs created per account for New Zealand agencies dropped from 57.59 in Q2 of 2023 to 45.2 in Q4 of 2023.

However, Herbst said there is still strong demand in areas such as AI, healthcare, and hospitality.

“Despite the decline in the number of roles created, the job market is still solid,” he said.

JobAdder CEO Martin Herbst.

Meanwhile, there was a dramatic increase in the number of job applications received per job over the year.

For recruitment agencies, it increased from 14 applications in Q4 of 2022 to 34.1 in Q4 of 2023.

For talent acquisition (in-house recruiters employed by the organisation), this rose from 24.3 in Q1 of 2023 to 40.1 in Q4 of 2023.

“Even with the rise in applications, these roles are becoming more challenging to fill. Employers are becoming more selective; decision-making processes are slower; and the criteria for a suitable candidate is more niche and tricky to meet,” Herbst said.

Across both Australia and New Zealand there was a consistent negative trend for permanent roles throughout 2023, dropping from -2.7 per cent in Q1 to -6 per cent in Q3 and -3.6 per cent in Q4.

This was countered by growth for contract roles of 2.2 per cent in Q3, though it dropped back to 1.2 per cent in Q4.

“The decrease in permanent roles during the year indicates a significant shift in the employment landscape,” Herbst said.

“Economic conditions have undoubtedly played a role in this pattern, with downturns potentially influencing employment stability. However, you can’t overlook the shift towards more flexible employment models as a contributing factor.”

Recent data from Seek NZ’s Employment Dashboard showed similar trends as national job ads in December 2023 fell 2 per cent from the previous month and were down 25 per cent year-on-year.

Meanwhile, applications per job ad had risen 9 per cent month-on-month.

The unemployment rate rose in the December quarter to 4 per cent, up from 3.9 per cent in the previous quarter, Stats NZ said yesterday.

That was lower than the market expectation for a rise to 4.3 per cent.

“The lift in unemployment is just taking longer to come through,” said Kiwibank economist Jarrod Kerr.

Layoffs hit workers in 2023

“The past four years have had Covid-19 layoffs followed by re-hiring at breakneck speed and then a spate of layoffs and cutbacks on teams and budgets,” said Mitch King, talent and recruitment leader for JobAdder.

Norwegian food processor Tomra confirmed in the lead-up to Christmas that 200 New Zealand workers would lose their jobs, with the first layoffs starting a week after New Year’s Day.

The move was part of a global cost-reduction exercise, the Herald reported.

Jobs at some of New Zealand’s biggest universities are also in the firing line as deficits run up.

In December, Massey University confirmed more than 60 science roles were being cut as part of a sweeping restructure. This was after Victoria University of Wellington accepted the voluntary redundancy of 74 staff in August amid financial struggles in which it had forecast a $33 million deficit.

The Auckland Council announced last year it would axe hundreds of jobs as it looks to become leaner and more financially stable.

At least 47 people lost their jobs at retailer Mitre 10 towards the end of last year.

And telco One NZ announced in December that an unspecified number of staff would be laid off in the New Year. Unite Union said last week this number was “north of 100″ as the consultation process remained ongoing.

Jarrod Haar, Professor of Management at Massey University, told the Herald recently: “The worst thing is, we’re only in that mid-tide, the tide is changing, it’ll get worse in three to six months’ time.”

“As we look toward 2024, it’s clear that the jobs market is undergoing significant changes,” Herbst said.

“Numerous factors, such as technological advancements, shifts in workforce demographics, and the economic climate, impact this evolution.”

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports.