For the second consecutive month, most small businesses report they have no plans to add workers over the next 12 months, according to a Wall Street Journal survey.

The May survey found 45 percent of small businesses were expecting to hire over the next year. The figure was 47 percent in April, 58 percent in March, and 59 percent in May 2022.

The two-month slump is the bleakest outlook for small-business hiring since June 2020 as the anti-COVID lockdowns were taking hold.

The slumping April and May survey numbers follow March’s decrease in job postings and increase in layoffs, according to the U.S. labor department.

The only times when hiring expectations were weaker since the survey began in 2012 were during that year’s fight over raising the federal debt ceiling and the early months of the COVID War, the WSJ noted.

Businesses have stopped hiring because consumers are more reluctant to spend; although they are paying more dollars, those dollars are buying less, as we have reported in “Consumers Spent More to Buy Less in January” (21 Feb 2023) and “Inflation, Consumer Spending Slowed in February” (4 Apr 2023), among other articles.  

With consumers pulling back, businesses are looking to contain costs. Because wages have been rising as inflation has sped up, labor costs are a key focus of companies’ concern for thrift.

In the April survey, 56 percent of businesses had begun cutting costs and 60 percent said holding off new hires was their preferred way to do it.

“There is no question that CEOs are downshifting into a slowing economy,” Joe Galvin, chief researcher at Vistage Worldwide, which conducted the WSJ survey.

However, “no one is willing to shed the hard-earned and expensive employees they hired,” he added, which has limited the number of layoffs so far.

TREND FORECAST: The labor market is peaking; layoffs are growing in number, a trend we noted in “Layoffs, Producer Prices Increase: Worst is Yet to Come” (16 May 2023), as we have been reporting for the past 40 weeks in our WHEN THE ECONOMY FALLS JOBS GO WITH IT section of The Trends Journal.

As the economy slows further, layoffs will continue to increase, cutting consumer spending and speeding the U.S. towards deep recession.