Those are powerful tools. If the candidate wants a job that exclusively involves doing things related to their narrow field of study, then there is probably going to be a problem, but unless you haven't communicated the job description effectively, they're not applying for a job as an academic - they know exactly where to go if they want to pursue that career path.
Disclaimer: newly-minted PhD here, with no particular need to apply my dissertation topic directly to my software engineering work.
Can you explain this a little more? I'm genuinely interested.
Certainly, Silicon Valley has tons of these sorts of jobs too. Google is full of PhDs. But the ratio of specialized domain products to consumer products seems to be higher in the southeast. And as a result, my perception is that the market's valuation of PhDs is higher. It's quite common to see companies in that market where not having a PhD is considered a severe liability.
For many areas of software development, such as database engine internals, the pool of people that are qualified or trainable within some reasonable number of months is quite small. Therefore, for those areas of software development the shortage is real for all practical purposes. A PhD in computer science does not automagically confer the ability to become a software subject matter expert within a few months.
This point is key given that industry turnover is such that the first company to hire you has to expect that they are simply training you for the next.
I doubt that this is the norm though. I get the impression that most of these hiring managers who don't value experience are hiring for pretty uninteresting work and simply want inexpensive labour. The op didn't state what area of work he's in, but if a junior is the ideal candidate, it's very likely not very interesting or difficult work.
edit: after a bit of digging, it turns out that the OP works on trading systems in Canada. The ironic thing is that 125k is quite a bit above a junior position in most of Canada. So it's not clear what is going on here. When hiring PhDs, he's competing with the US companies and might be a bit shy of what they pay. On the other hand, if he's paying a junior 125k, he's paying well above the local average.
Personally, I don't think recruiters get this point.
Perhaps you should instead consider that their specialization is a specific example of them applying themselves to a difficult new problem and solving it. It seems unlikely to be able to constantly hire people already experienced with what you're doing. Wouldn't you rather hire someone who's demonstrated an ability to learn something new and succeed at it?