A growing number of business economists expect companies to reduce their headcounts for the first time since the pandemic, a sign the job market is beginning to cool amid an increasingly dark economic outlook.
That's according to a new survey published on Monday by the National Association for Business Economics, which shows that about 20% of the group's members expect employment at their company to fall in the coming months.
"For the first time since 2020, more respondents expect falling rather than increased employment at their firms in the next three months," NABE President Julia Coronado, the founder and president of MacroPolicy Perspectives, said in a statement. "Fewer respondents than in recent years expect their firms’ capital spending to increase in the same period."
Just 12% of those surveyed expect employment to rise over the next three months – fewer than half of the share who reported hiring more workers over the past three months. Roughly two-thirds of the respondents reported wages increasing in the past three months, which is unchanged from November.
Wage growth has been a big contributor to stubbornly high inflation, which remains about three times higher than the pre-pandemic average.
The results "indicate widespread concern about entering a recession this year," Coronado said. More than half of respondents see the possibility of a recession over the next year at 50% or higher, the survey showed.
The January survey included responses from 60 NABE members and was conducted between Jan. 4-11.
Although the labor market remains healthy and one of the few bright spots in the economy, there are signs that it is beginning to soften in the face of higher interest rates. The economy added just 223,000 jobs in December, the smallest gain in two years, and there have been a number of high-profile tech layoffs over the past month.
Federal Reserve officials have made it clear that they expect unemployment to climb as a result of their aggressive interest rate hike campaign, which could force consumers and businesses to pull back on spending. Updated projections from the central bank's December meeting show that officials expect unemployment to rise to 4.6% by the end of this year, up from the current rate of 3.5%.
That could mean more than 1 million Americans lose their jobs over the course of this year.