Latest / Hiring & Firing with Fexingo: Recruitment, Performance, and Workforce Decisions / How the Hiring Ramp Self-Corrects a Slow Market
Transcript
- Lucas: So we're a couple of months past the Q1 earnings cycle for 2026, and I keep seeing the same headline in different fonts: hiring is down ten percent year-over-year across tech and professional services. But here's the part that doesn't get the headline — the quality of the actual hires being made right now? It's up. Luna: Wait — you're saying a slower market is producing better hires? That feels counterintuitive. Usually when hiring slows, people assume the company is just circling the wagons. Lucas: Right, that's the standard read. But I think the slower market is acting as a self-correction mechanism. When there's less pressure to fill a seat in three weeks because headcount is frozen or budget is tight, the screening process naturally gets more rigorous. You don't panic-hire someone because you're terrified of missing a quarter. Luna: That makes sense. And the candidates themselves are probably less distracted too — if they're employed, they're not fielding five recruiter messages a day. Lucas: Exactly. The noise drops on both sides. And if these conversations have moved your work forward in some small way — maybe you've tweaked your own hiring process, or thought differently about a career move — that's exactly why we keep this show entirely free of ads. We deliberately don't run them. If you want to support that choice, the link is buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small thing that keeps the whole thing honest. Appreciate everyone who tosses in. Lucas: So let's look at the data from the last couple of downturns. In 2008, companies that kept hiring — not just maintaining headcount but actively recruiting — came out of the recession with teams that had significantly higher retention rates. A working paper from the National Bureau of Economic Research tracked about 4,000 firms through 2009 and found that those which hired during the downturn saw a 40 percent lower turnover in the subsequent three years compared to firms that froze hiring entirely. Luna: Forty percent lower — that's not marginal. That's a structural advantage. And it's not just about getting better candidates because fewer people are applying? Or is it both? Lucas: I think it's both. Fewer applications, but the applications that come in are more intentional. The candidate who applies during a hiring freeze or a slowdown is typically more invested in the role and the company. They've done the research. They know the market is tough, so they're not just carpet-bombing their resume. Luna: So the self-correction is happening on the candidate side too. They're self-screening before they even hit submit. Lucas: Precisely. And then on the employer side, the interview process changes. When you have a stack of two hundred resumes and a mandate to fill the role in two weeks, you're scanning for keywords. When you have thirty resumes and a mandate to get the right person even if it takes two months, you actually read the cover letter. You call the references. You do a case study or a work sample test. Luna: I've seen that play out. I talked to a hiring manager at a mid-sized SaaS company last year — they were in the middle of a sector slowdown in early 2024, and they decided to hire a senior product manager even though headcount was technically frozen. They took almost three months to fill the role. That person is now one of their highest-rated PMs. Lucas: That's a great example. And it ties to something called the 'hiring ramp self-correction.' The idea is that market conditions naturally recalibrate how rigorously both sides evaluate fit. In a hot market, the equilibrium is fast and shallow. In a cool market, it's slow and deep. The system self-corrects. Luna: But there's a risk, right? If you slow down too much, you miss out on top talent that gets snapped up quickly. Lucas: That's the tension. You don't want to be so cautious that your best candidate accepts another offer while you're still scheduling a third round. But I'd argue that in a slowdown, the cost of a false positive — hiring the wrong person — is higher than the cost of a false negative — letting a good candidate slip away. Because if you make a bad hire in a tight market, you've wasted time and budget you can't afford to lose. Luna: So you're saying the self-correction isn't just about slowing down — it's about resetting the risk calculation. Lucas: Exactly. And I think there's a second-order effect that's less discussed. When you hire during a slowdown, you send a signal to your existing team. It says, 'We're investing in the future even though the present is uncertain.' That boosts morale and retention in itself. A study from the Society for Human Resource Management in 2023 found that internal teams reported a 15 percent higher engagement score when their company made a strategic hire during a downturn, compared to teams that saw a freeze with no hires at all. Luna: Interesting. So the hire itself becomes a cultural artifact. It proves the company isn't just hunkering down. Lucas: Right. And it works the other way too. If you're a candidate and you see a company hiring during a sector slump, you interpret that as stability. You're more likely to stay longer because you feel like you joined a team that had conviction. Luna: I want to go back to the 2020 pandemic for a second. That was a weird one because hiring basically stopped for two months and then exploded. Did the self-correction hold? Lucas: It held in a compressed timeframe. Between March and May 2020, hiring dropped something like 40 percent. Then by June, companies that were remote-ready started hiring again — but they hired differently. They put more emphasis on communication skills and self-management because they knew the office wasn't coming back. The market forced a redefinition of what 'good' looked like. Luna: So the self-correction isn't just about speed — it's about criteria. The market tells you what to value. Lucas: Exactly. And that's the practical takeaway for a hiring manager listening today in late May 2026. We're not in a crash, but we're in a soft patch. Unemployment is low but job openings are down. This is exactly the environment where you should be recalibrating your hiring process. Add a structured interview. Require a work sample. Call three references instead of one. Luna: And if you're a candidate, what's the lesson? I imagine it's the flip side: be more intentional, because the companies that are hiring are being more intentional too. Lucas: Exactly. For a candidate, the signal is that generic applications won't work. You need to tailor your resume, prepare specific stories, and show that you've done your homework on the company's current challenges. The market is self-correcting for both sides. Luna: One thing I'm curious about — does this self-correction also affect compensation? In a slower market, are companies getting away with paying less? Lucas: That's a good question. The data is mixed. Overall salary growth has moderated — we're seeing two to three percent year-over-year instead of the five to six percent we saw in 2022 and 2023. But for individual hires, the premium for the right person hasn't gone away. Companies that slow down and hire well are still paying at or above market. They're just not overpaying for the ninety percent fit. Luna: So the self-correction isn't a discount. It's a better match. Lucas: That's the phrase — a better match. And that match quality is what drives retention, productivity, and ultimately the return on the hiring investment. The slower market is effectively a gift to companies that know how to use it. Luna: I do think there's a risk of over-optimising. If you slow down too much and build a six-month hiring process, you might miss the window. The self-correction has to be calibrated. Lucas: Absolutely. There's a sweet spot. The research suggests that the optimal time to fill in a moderate slowdown is about 45 to 60 days — roughly double the typical 30-day hot-market pace. That gives you enough time for three rounds of interviews and a case study without losing momentum. If it stretches beyond 90 days, you start losing candidates to other opportunities. Luna: That's a useful benchmark. So for someone listening who's in the middle of a hiring process right now, what's the one thing they should change? Lucas: Add one structured element that you don't normally use. If you rely on behavioral interviews, add a work sample. If you use work samples, add a reference call that digs into specific past projects. The market has given you a little more time — use it to gather more data, not to overthink. Luna: I like that. It's not about adding friction — it's about adding signal. Lucas: Exactly. The self-correction is already happening. The question is whether you're taking advantage of it or just getting slower without getting smarter. Luna: Alright, so final thought: if you're a hiring manager, slow down but don't freeze. And if you're a candidate, lean into the intentionality. The market is rewarding the prepared. Lucas: Well said. That's the self-correction in action. Thanks, Luna. Luna: Thanks, Lucas.