Help My Career: Hiring was strong in September. So why did recruiting and human resources services shed 14,700 jobs?

Businesses still want more workers — but fewer people are working as recruiters.

Some 14,700 fewer employees worked in employment services in September compared with a month earlier, the sixth consecutive month the sector saw a decline in employment, according to Bureau of Labor Statistics data released Friday. The hiring industry has shed workers in all but two months over the last year.

Employment services workers help to recruit talent, and manage staff for companies. They could either work on contract, or work within the company’s HR department itself. 

Across the labor market, hiring has been strong. The U.S. added 336,000 new jobs in September — far more than the 170,000 new jobs Wall Street economists had predicted — in a sign companies are still looking for new hires. The increase was driven by hiring in bars, restaurants and hotels, healthcare providers, and the government.

Part of the decline in employment services was driven by fewer temporary workers, said Julia Pollak, the chief economist at the online job-search platform ZipRecruiter. Some 4,200 fewer temporary workers worked in employment services in September compared with the previous month, according to the BLS. 

But that’s good news. “That’s a story of the economy going back to normal,” Pollak said. Although the number of jobs in employment services is in decline, it’s still higher than it was before the pandemic, she added. 

There were more than 2.9 million temporary recruiters last month, compared with 2.8 million temporary workers in January 2020. And there were 3.7 million recruiters in total in September, versus 3.5 million in January 2020.

The pandemic brought on a labor shortage in 2020, followed by a hiring craze in 2021 and early 2022 after the economy opened up again. Companies were short-staffed and struggled to hire, so they relied “excessively” on temporary agencies at a financial cost, Pollak added. 

The decline in recruiter employment started last fall in the months after the Federal Reserve first started to hike interest rates to combat high inflation. When many big tech companies began announcing layoffs, recruiters’ jobs were some of the first to go, as companies foresaw slower hiring as they battled higher borrowing costs. The Fed’s benchmark interest rate now stands in the 5.25% to 5.50% range. 

At the same time, more companies are outsourcing certain employment services, economists say. Since the start of the pandemic, human-resources consulting services have seen rapid growth. Some 99,800 workers worked in the sector this past July compared to 76,600 workers in July 2020, based on the latest detailed BLS data. 

High interest rates and rising prices for raw materials and labor are forcing many companies to cut costs. Replacing some workers with technology is one way to do that, said Mark Hamrick, a senior economic analyst at Bankrate.

“If you’re adding to your payrolls, you need HR for that. If you’re maintaining your workforce, you need HR for that — because people still need to have access to HR when they’re employed,” Hamrick said. “And if you’re reducing your workforce, you need to have HR, because that requires that talent and resources well.”

See also: Explore the monthly jobs report data by industry using MarketWatch’s tool

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