Hunting And Employee Turnover Are No Longer Increasing Published on 25-01-2024

Labor market at turning point, tightness continues

Despite the shrinking economy, the labor market is still experiencing significant tightness. But the hyper-tightness does seem to have reached a turning point. Labor market activity (the share of people actively looking for other work) has -despite the low unemployment rate- increased slightly and the share of people who have found new/other work is also leveling off. Attrition is not increasing further. Sourcing pressure, which indicates the extent to which people are approached for new/other work, has not increased for the first time in three and a half years. And finally, expected job search time also shows no further decline. This is according to research on the labor market behavior of the Dutch working population among a sample of more than 4,000 people in the fourth quarter of 2023, conducted quarterly for Intelligence Group for more than 20 years.

Arjan Ruis, senior labor market analyst at Intelligence Group

"None of these are spectacular changes, but all in all they do show a picture of a labor market that is at least not getting even tighter and is likely to become slightly less overheated."

All the facts at a glance and more:

Active labor market supply: 1.06 million persons (growth of 41,000 vs. Q3 2023).

Job changes: 1.85 million persons (no growth vs. Q3 2023).

Sourcing pressure: 41.6% (no growth vs. Q3 2023).

Expected search duration: 3 months (no further decline).

Raising the retirement age seems a logical solution to increase the supply

There is no question of an ample labor market for the time being. For that, demand will have to decrease significantly and supply will have to increase. Neither scenario seems obvious. With the high participation rate, low unemployment, and limited willingness to work more, there is little elasticity of supply. Getting people to work more hours is indeed an option to work out, especially if working more pays extra. A combination could also be found here with self-employment (hybrid forms of employment), but self-employment/flex work is not a popular form of employment within political Hague. Another option is by “importing” labor (immigration), but apart from the political and social debate, that is not a structural solution in the long run either. Raising the retirement age further to, say, 70, on the other hand, can provide a sustainable additional supply. However, this will also encounter a lot of political resistance, not to mention the willingness of people to continue working longer.

Labor productivity is the key in the labor market, but it is under pressure

In the short term, there are no easy solutions to achieve additional supply. In that case, the key lies in increasing labor productivity (doing the same work with fewer people), but that is exactly what the Dutch economy has been lacking for ages. It is therefore also striking that employment continues to grow while the economy shrinks, meaning that productivity declines. “Scarcity in the labor market is partly the result of an allocation problem, where the right talent and skills are not in the right job, sector or with the right employer. The result is turnover, high absenteeism and low motivation which all have a negative effect on the development of labor productivity,” said Geert-Jan Waasdorp CEO of Intelligence Group.


Geert-Jan Waasdorp CEO of Intelligence Group.

"There is not yet enough pain among employers to bring about really big changes, but that is a matter of time now that labor market tightness is the all-important limiting factor to bring about major social change."

Additional depth on key labor supply indicators

Labor market activity, the extent to which the Dutch labor force is actively looking for a job, increased compared to last quarter. There was also an increase compared to the fourth quarter of 2022. Just under one in eight persons in the Dutch labor force (12.0%) is actively looking for a new job. Among employed people, it is only one in 12 (7.9%). At 44.9%, the group of latent job seekers – those who are not so much actively looking, but are open to (other) work – is more than three and a half times as large as the group of active job seekers. In the battle for personnel, therefore, finding, approaching, and enticing the latent job seeker is especially important.

In the number of job changes, there seems to be a leveling off. Compared to the previous quarter, in absolute terms, there was no change in the number of people finding other/new jobs. In relative terms, there was the share of job changers/finding decreased from 21.1% to 21.0%. Compared to the same quarter last year, there is still an increase (+15 thousand / +0.1%), but the growth is significantly lower than in previous quarters. Mobility/dynamics have been very high in recent years. It is not exclusively people changing jobs, by the way, although this is the largest group within the more than 1.8 million job changers. It also includes those who have found a job from a non-working situation. When employment increases, the share of this group becomes larger.

Sourcing pressure remained unchanged at 41.6% in the fourth quarter. This was the first time since the mid-2020s (corona). Compared to last year, however, there is still a slight increase. Still, very many people from the Dutch labor force are approached by employers/recruiters/agencies for a new job. Probably also prompted by the passivity of the labor force (low labor market activity). Sourcing pressure is an important indicator of scarcity in the Dutch labor market.

Unemployment in the Netherlands has been very low for some time. Currently, it is 3.6% (December 2023). In its most recent forecast (August 2023), the CPB foresees a slight increase to 4.0% in 2024, but that is still relatively low. Therefore, the labor market is expected to remain tight.

The expected job search duration stabilized in the fourth quarter. This search time is based on the period that people themselves say they need to find a new job. It can be seen as an indicator of employee confidence in the labor market. At 3.0 months, the expected search duration is still the lowest since the start of the measurements in 2011.

The proportion of job finders who received a permanent contract immediately increased slightly again in the fourth quarter. In the fourth quarter, 44.0% of job finders said they received a permanent contract immediately (up from 43.0% in the previous quarter). On the one hand, employers are facing a very tight labor market and are trying to entice and/or retain staff with a permanent contract. On the other hand, they are experiencing a cooling economy and uncertainty about the future. In Q2 2023, the share of permanent contracts for job finders was at its highest point (44.9%). Now it is somewhat lower, nevertheless, the share is still very high. In early 2020, just before the outbreak of the coronavirus crisis, the share was also high. Then there was a decline, but since the end of 2021, the share of permanent contracts among job finders increased again. The figures fit the picture of a tight labor market.

Nearly 1.6 million new job openings were created in 2022, according to CBS. That is a big increase from the 1.4 million new job openings in 2021. Once again, a record was broken when it came to the number of new job openings. The vacancy rate (the number of vacancies relative to the number of employee jobs) also reached a record at 17.4% (the average for the past 25 years is 11.8%). Moreover, the unprecedented vacancy volume was (and is) accompanied by a limited supply of labor. Consequently, the tightness in the labor market was unprecedented. The most recent prognosis of the CPB and the UWV about the Dutch economy and labor market have been calculated in our vacancy model. The expectation based on the model is that the number of vacancies in 2023 will have decreased somewhat to 1.4 million. Final figures will follow in mid-February, but 1.1 million vacancies were created in the first three quarters of 2023 alone. In 2024 and 2025, the number of job openings will also be around 1.4 million. Thus, the total number of vacancies as well as the vacancy rate will remain relatively high.