Labor Market Strength Hides Some Industry Struggles

Reality and perception collide to paint what can seem like a confusing picture of the labor market. But the stats don't lie.

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Jun 22, 2023

I started writing this column two years ago this month. Reflecting on the past two years, it’s astonishing what has unfolded in the labor market in such a short period.

In June 2021, news centered around stimulus checks keeping workers on the sidelines, which states were abandoning mask mandates, debates over vaccinations, and what impact the next variant would have on the labor market. Job recovery was under way, but the pace of job gains often fell short of economists’ expectations.

At the same time, the Great Resignation was kicking into gear as voluntary quits reached 4 million per month for the first time on record. Inflation had begun making headlines, as annual growth for the consumer price index (CPI) jumped from 2.6% in March 2021 to 5.4% by June, and just kept climbing.

Job Gains Continue to Exceed Expectations

Fast-forward to today. Overall, the labor market remains incredibly strong given the circumstances and challenges navigated since 2021. I heard one source reference that the 339,000 jobs added in May 2023 marked the fourteenth time in the last 17 months that job growth exceeded consensus forecasts.

Additionally, inflation has cooled significantly, especially since last summer, and annual growth for the CPI slowed to 4% in May. While inflation is still higher than the Fed’s target, consumer prices are growing at the lowest rate in 26 months. In response, the Fed paused interest rate increases for the first time in 15 months, but more could still be on the way.

Turnover Returns to “Normal”

Employees are quitting their jobs at a rate almost identical to that of the two years before the pandemic. The overall volume of quits today is higher, reaching 3.8 million in April, but the labor force has also grown and the relative quits rate of 2.4% per month is very close to the 2018–2019 pace.

Believe it or not, layoffs are currently in a normal range, as well. In fact, the total volume of layoffs is still low by historical standards, but layoffs have increased from record lows experienced last year.

Anecdotally, it feels like layoffs have climbed much higher than the stats being reported. The latest reported monthly total of layoffs from the U.S. Bureau of Labor Statistics was almost 1.6 million. While that sounds like a lot, that level is lower than any month from December 2000 to August 2020.

You read that correctly, the current level of layoffs is lower than any month in the 20 years before the pandemic, even though today’s labor force is larger. It doesn’t feel that way, but other metrics, such as unemployment insurance claims, also corroborate that trend.

There are either some massive revisions on the way, or the job market really is much stronger than what it feels like at times.

Job Market Varies Significantly by Industry

Industry is where evidence of a slowdown in the labor market becomes more apparent. No doubt, layoffs are happening across all industries, but certain types of businesses are experiencing more of a slowdown than others.

On a relative basis, web search portals (-4.2%), furniture manufacturing (-2.7%), and financial lending (-1.8%) show some of the largest drops in employment levels since the beginning of the year. It will feel very much like an employer’s market in these industries because of how tight budgets are.

On the other end of the spectrum, performing arts and spectator sports (5.2%), state-government education (4.5%), department stores (4.4%), and heavy and civil engineering (2.3%) are among the many industries adding jobs at more than twice the pace as the U.S. average (1.0%).

It is likely still closer to a candidate’’s market for those industries as businesses are still trying to hit aggressive hiring targets.

What This Means for Recruiters and Job Seekers

If your business is in hiring mode, whether it’s backfilling open roles or adding new positions, it will still be difficult to find talent. And if it feels like more of a challenge than before the pandemic, that’s because on a relative basis there are fewer unemployed job seekers than at almost any time in history.

But due to job cuts in some sectors, recruiters may be able to expand their talent pool by finding job seekers who are more willing to switch industries. And for job seekers, there are recruiters in other industries who are looking for talent.

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