The Labor Market Looks Different by Industry

Your view of the economy is often influenced by which industry you're in.

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Dec 21, 2023

Editor’s note: For the past few years, Jay Denton has been sharing his views on the workforce via monthly articles as ERE’s labor market columnist. Each piece displayed Jay’s knack for taking a slew of complex information and making it accessible for a recruiting audience. But alas, the end of this year also marks the last of Jay’s regular columns. As Jay moves on to focus on other endeavors, I’d like to thank him for all his terrific contributions over the years. Meanwhile, stay tuned for a new labor market columnist to kick off 2024. 

Labor market stats were solid once again with 199,000 jobs gained in November, outperforming economists’ expectations. The unemployment rate declined to 3.7%, and wage growth remained robust at 4.0%. At a glance, the labor market would be considered strong and very competitive from an employer’s standpoint, but that is not the case for many businesses.

Which Industries Are Driving Job Growth?

The latest report continued themes that have become common, including downward revisions to the previous month’s totals. September’s job gains were lowered by 35,000. When it seems like the job market isn’t nearly as strong as the stats have suggested, it’s partially because the initial reports were overstated.

But the biggest disconnect between the topline numbers and the reality for most businesses is easy to see when looking at performance by industry. Earlier in the year, I often wrote and spoke about how jobs were being created in many types of businesses. The tide turned significantly on that narrative starting in June.

Since then, there have been 1,117,000 jobs created in the U.S., and 1,106,000 (or 99%) of them have been in just three industries. Healthcare and social assistance, government, and leisure and hospitality make up 39% of the jobs in the U.S., but they represent practically all new jobs that have been created in the last six months. For comparison, they averaged close to 43% of new jobs created in 2021 and 2022.

Now, it’s not that all other industries are losing a large number of jobs. In fact, very few industries have lost jobs at all over the past year, but they aren’t adding jobs either. Outside those three industries, the rest have been static when it comes to job growth — they are treading water. Rather than expanding with new roles, hiring is mainly focused on backfilling turnover. That could start to change next year if the economy stays out of a recession and interest rates begin to decline.

What’s Going on With Interest Rates and Inflation?

In its latest meeting, the Fed held rates steady and suggested interest rates could be lowered next year. The last time the Fed opted to increase rates was in July. Inflation has remained in check, with the consumer price index registering 3.1% in November. The Fed has lowered its inflation expectations for 2024, projecting we’ll end next year at 2.4% price growth. Many are projecting three rate cuts next year, with the first potentially in the second quarter.

Hopefully that is good news for those in the finance industry. That sector only had 399,000 jobs open in October, the lowest total since mid-2021, and fewer than many months before the pandemic.

Reasons to be Optimistic Heading Into 2024

In other positive news, consumer spending increased in November, a sign that some of the other struggles in the labor market didn’t slow down holiday shopping. A recent article by The Wall Street Journal noted the added benefit prices have dropped for many types of items purchased as holiday gifts. Compared to a year ago, prices for toys, sporting goods, and “smart home assistants and the like” were down by roughly 2% to 5%.

One reason consumers may feel more optimistic about spending is the stock market. Last week they may have seen the headline that the Dow Jones Industrial Average hit a record high. Watching the balance on retirement and investment accounts grow can provide a confidence boost that the economy continues heading in the right direction. While not everyone owns stocks, a record two-thirds of Americans do have money invested in the stock market. And those who don’t are still consuming news about the economy and businesses.

Heading into 2024, expect the economy to continue on the current path — slower but solid growth with inflation and wage growth coming down from record levels. But a strong economy doesn’t mean all employees or businesses are feeling the benefits. Growth is likely to remain concentrated in certain industries, but unemployment and layoffs shouldn’t spike either.

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