The labor market started the year with some unexpectedly great news. Not only was the first jobs report of the year strong; it was spectacularly good. In January, the U.S. labor market added 517,000 jobs. It was the largest gain in six months and signaled that many businesses remain confident in their hiring plans, despite the cloud of pessimism created by continued news of layoffs.
Putting Layoffs Into Perspective
We are several months past the initial rounds of layoffs and the job market is still roaring. According to stats aggregated by layoffs.fyi, the initial spike in tech layoffs started in June 2022, but the overall labor market has remained very steady since then.
Since July 2022, net job gains total nearly 2.7 million. To make it clear what that number represents, it means that not only did most people who lost their jobs find new ones, but millions of additional jobs were added on top of those.
I feel like I spent most of last year reminding people that times were not normal and that some degree of slowdown was on the horizon. These days, I feel like I spend more time playing the other side of the fence and reminding people to look at the actual numbers being reported, which aren’t as dire as the headlines.
Strong Demand Minimizes Impact of Layoffs for Many
As of now, several metrics point to fairly quick transitions between jobs for many people impacted by layoffs. A Wall Street Journal article in late-December 2022 referenced a ZipRecruiter survey showing that 53% of those laid-off started a new job less than a month from being terminated. And another 30% were out of work for between one and three months. That trend makes sense given that there are 11 million open jobs.
In addition, unemployment-insurance claims remain near pre-pandemic lows, and the overall unemployment rate registered just 3.4% in January. That was the lowest since the 1960s, and the last time it was lower was 1953.
If you haven’t brushed up on the history of 1953 lately, Dwight D. Eisenhower was in his first year as president, and Texas Instruments just invented the transistor radio. Said differently, it has been a very long time since the labor market has been tighter than it is right now.
At LaborIQ, we are able to see how often HR and TA professionals are market-pricing jobs — and searching today’s recommended compensation — which can also be an indicator of hiring volumes. Looking at usage within our product, the volume of salary searches on a per-user basis in January 2023 was practically identical to January 2022. That suggests hiring volumes have not slipped, at least for our user base.
All of the above stats seem to counter the sentiment of daily LinkedIn news updates of layoffs.
Keep in mind, the labor market was recently at a record high for voluntary turnover, and a record low for involuntary turnover. Now that those numbers are coming back into balance, it is much more likely that the candidate interviewing is unemployed compared to a year ago, but indicators show most candidates will not be jobless for long.
Mixed Bag for Wage Growth and Inflation Measures
Another good sign for employers is that wage growth is moderating. In January, the average hourly wage was up 4.4% from the prior year. That growth rate was lower than any point in 2022, and down from the peak of 5.9% in March last year.
Unfortunately, other measures of inflation are not falling as quickly as hoped. The consumer price index was practically the same as where it ended last year, registering 6.4% annual growth in January. The producer price index, which measures what it costs businesses to acquire the inputs they need to produce goods and services, showed annual growth of 6% in January. While down from a peak of 11.6% last year, it was projected to decline more substantially than it did.
There is room for both figures to decelerate more between now and mid-summer, but the current inflation rates coupled with a hot job market will likely lead to more interest rate increases from the Fed. That action could translate to a broader slowdown at some point, but let’s keep focusing on the good news while we have it.
More Optimism: Robust Hiring Projected for 2023
Heading into 2023, we were forecasting approximately 64 million hires to occur in the year. That number is down from more than 76 million hires in 2022, but last year’s pace was unsustainable. My expectation is that we will be raising our hiring estimates for 2023, and that a more optimistic outcome for the labor market is feasible. That means HR and TA professionals still have a busy year ahead of them, but don’t be surprised to see some choppy waters in the months ahead.