[ALittleLight]

How is it polite to mislead candidates? Surely it can be uncomfortable to hear that you aren't up to par for a job or didn't interview well - but if that is the truth it is better to hear that truth than to hear some platitude about headcount. If I believed the "headcount" story I might invest time waiting to see if headcount opened up, or hold out hope that I'd potentially get an offer. On the other hand, if I heard that I had gaps X, Y, and Z I'd probably start working on X, Y, and Z - or at least think through how I could demonstrate my aptitude in those areas better or mitigate my weakness there and so on.

It's like if your doctor tried to be polite to you by not mentioning some serious disease because he was afraid it would make you feel bad. It might indeed make the candidate feel bad to hear about their (perceived) deficiencies - but if they do hear about it then they can do something about it!