Job Stability in California Reflects Caution as Workers Adjust to a Slower Hiring Cycle

In California, new data suggests the job market is sending two conflicting signals. On the surface, low employee turnover suggests stability. But the broader data tells a more fragile story: hiring has stalled, job postings remain scarce, and employee Net Promoter Scores (eNPS) sit firmly in the middle of the pack. Rather than signaling contentment, this combination points to widespread risk aversion, as employees stay put in a labor market they perceive as fundamentally unreliable.

That tension between apparent stability and underlying insecurity is especially pronounced in California’s tech-driven economy, where innovation cycles move faster than labor markets can adjust. Larry Chao has spent his career operating at that intersection. A startup executive and advisor with deep roots in the state’s technology ecosystem, Chao draws on experience across AI, mobile, and semiconductor industries, shaped by his advisory work at Berkeley SkyDeck and academic training at MIT and Stanford.

“People are not super optimistic about the job market, which is why you’re seeing terms like ‘job huggers.’ They are staying put because they don’t feel confident about what’s outside,” says Chao. This job-hugging behavior, staying in a role you are no longer enthusiastic about because of fear of a volatile job market, is a rational response to sustained signals of instability. A major driver is the growing disconnect between corporate performance and employee security, as strong earnings reports increasingly coincide with layoffs. The pattern is further reinforced by prolonged hiring freezes across the tech sector, with lasting consequences for the next generation of talent.

• Earnings vs. layoffs: Corporate earnings are no longer a reliable signal of job security. Companies continue to post strong financial results even as workforce reductions accelerate. “What we’ve seen is the stock market and the job market have completely diverged,” Chao notes. “The majority of companies beat or met earnings last quarter, yet we’re still seeing these significant cuts happen.”

• A tough market for grads: A multi-year hiring stall has reshaped early-career prospects across industries, leaving many graduates without clear paths into the workforce. “Hiring at major tech companies has been essentially flat for the last three years,” he says. And while tech’s slowdown dominates headlines, Chao points to even larger layoffs in government and retail, underscoring that the problem extends well beyond Silicon Valley.

Adding to this insecurity is a hiring environment where a flurry of activity can mask a lack of real opportunity. Chao describes a market saturated with so much “noise” that it becomes fundamentally untrustworthy.

• Ghost jobs: The hiring process has become increasingly distorted, with signals that are harder for candidates to trust and interpret. “We’re seeing more and more of these ‘ghost jobs,’ where companies aren’t really following through,” Chao says. As automation spreads through recruiting, both employers and applicants are relying on AI at scale, flooding the system with automated job posts, applications, and screenings, eroding transparency and trust. “Companies are using AI to conduct interviews, while applicants are using AI overlays or even avatars,” Chao notes. “What’s meant to simplify hiring just makes the entire process harder and less reliable.”

Pushed by a volatile job market to cling to their roles, many employees find that the stability they seek is fleeting. Instead, they encounter internal pressures that quietly erode it. As companies demand higher productivity without making corresponding investments in their workforce, employees face rising burnout and a growing sense of disposability. This undercurrent of discontent is increasingly reflected in declining employee satisfaction at major firms.

• Productivity vs. pay: Rising productivity is no longer translating into higher compensation, as companies stretch smaller workforces rather than reinvest in people. “Company productivity is going up, but salaries are going down,” Chao says, as cost-cutting and automation are reshaping how employees interpret their value inside organizations. “The message to many employees is that they are fungible,” Chao notes, pointing to companies replacing roles like customer success with AI as a clear signal that not all work is equally valued.

• Back to basics: So what’s the fix? Top-down policy mandates often produce little more than minimum compliance. A more durable solution may lie in a familiar model: a modern return to apprenticeships. “We’re breaking the first rung of the career ladder. If AI absorbs entry-level work, companies have to replace it with intentional training models, or they won’t have a next generation of talent at all,” says Chao. As traditional entry-level pathways erode, companies may need to rethink how they identify, train, and develop early-career talent. Chao argues for “new models for evaluating talent,” noting that apprenticeships may grow more common as AI takes over many of the foundational tasks once assigned to new hires.

For HR leaders, the takeaway is clear. In a frozen labor market, retention is no longer a reliable indicator of organizational health. Low turnover can conceal burnout, stalled development, and deep disengagement. In this environment, employee Net Promoter Score offers a clearer signal, revealing whether people are staying because they are engaged and invested, or because they feel they have nowhere else to go. “What’s clear is that companies are trying to do more without hiring and without investing in their people,” Chao concludes.