Goldman Sachs indicates that hiring rates have slowed, but companies are improving their ability to match employees with suitable roles. Economists at Goldman Sachs observed that a decline in early-stage resignations suggests both employers and employees are achieving better matches. Tools such as LinkedIn and artificial intelligence may assist companies in avoiding poor hiring decisions, thereby reducing labor market turnover. While recruitment rates have significantly decreased across many developed economies, Goldman Sachs believes firms may simply be becoming more selective in identifying the right candidates. This trend is partly attributed to a drop in short-term separations: fewer employees are leaving or losing their jobs shortly after being hired. This decline indicates that even as the labor market cools following the post-pandemic hiring boom, both businesses and workers are increasingly able to establish better matches from the outset. Goldman Sachs economists wrote in a Tuesday report, "Much of the decline in turnover reflects a reduction in separations within the first one or two quarters after employment begins, a pattern suggesting that over time, both employees and firms have become more adept at identifying 'good' matches." Historically, short-term separations have been common, as some hires ultimately prove to be poor matches between employers and employees. However, over the past two decades, short-term separation rates in developed economies have steadily declined, with this trend accelerating after the pandemic. Data from the U.S. Census Bureau and Canadian labor statistics confirm this pattern. A reduction in hiring mismatches The decline appears to be widespread across industries. It can be explained by shifts in labor force composition, indicating a structural change in how employees and employers form work matches. Goldman Sachs economists wrote, "We believe the best explanation for the decline in short-term separations is that increased information and improved screening processes have enhanced the ability of both firms and employees to identify 'good' matches." Platforms such as LinkedIn, Glassdoor, and Indeed allow employees to gain insights into company culture and working conditions before accepting a position. Meanwhile, employers are increasingly using digital screening tools, including AI, to evaluate candidates and filter applicants. These tools may help reduce hiring errors, the economists noted. Better matches lead to fewer early separations—meaning companies have less need to recruit replacements. This shift may also make the overall labor market more efficient. With fewer unsuccessful job matches, frictional unemployment—the type of unemployment that occurs when workers transition between jobs—may also decline. Goldman Sachs' analysis comes at a time when the current labor market is sparking debate, with some economists describing it as a "low hiring, low firing" environment. In such an environment, further declines in hiring could push up the unemployment rate more quickly, as opportunities for the unemployed and young job seekers become scarcer.