6 issues to know in a job market juggernaut
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1. Unemployment is at an all-time low
The unemployment rate fell to 3.4% in January — the lowest level since May 1969. In other words, the last time the unemployment rate was this low, Neil Armstrong wasn’t on the moon, Bunker said.
In fact, one would have to go back to October 1953 to find a lower unemployment rate – 3.1%.
The unemployment rate is the best job indicator for the average American — it provides a holistic view of their strengths or weaknesses and a reliable measure of a potential recession, said Daniel Zhao, chief economist at Glassdoor, a careers site.
“The labor market is still strong and workers have an opportunity to go out and find a job that suits them better,” Zhao said.
US employers added 517,000 jobs in January, well above expectations. They added a total of 4.8 million jobs in 2022, more than double the 2015-2019 average of around 2.3 million, said Julia Pollak, chief economist at ZipRecruiter.
2. Layoffs are small despite Big Tech
Big tech companies — like Amazon, Google, Meta, and Microsoft — have announced mass layoffs in recent weeks. These job cuts, affecting tens of thousands of employees, raised fears that the carnage would spread to other areas of the US economy.
However, that doesn’t seem to be happening.
“What strikes me the most about the job market is that there are no layoffs,” said Mark Zandi, chief economist at Moody’s Analytics.
According to data from the Job Vacancy and Labor Turnover Survey, the layoff rate has remained below its pre-pandemic low for 22 straight months. Workers filed 183,000 new claims for unemployment insurance last week — far below the average of around 245,000 from 2015 to 2019, according to Labor Department data.
“That’s just staggeringly low,” Zandi said of unemployment claims.
Businesses are reluctant to lay off workers and the labor market is strong enough to absorb people who lose their jobs quickly, Zandi said.
Tech jobs also make up a small portion of the US workforce: about 4% of total employment in 2020, according to a Deloitte report released in 2021.
3. The “great resignation” chugs along
Workers are still quitting their jobs at historically increased rates.
Most workers who quit do so for new jobs; They don’t leave the workforce entirely. Voluntary departures are therefore an indicator of workers’ confidence — they are optimistic about their chances of finding a better job elsewhere, economists said.
About 4.1 million people quit in December, according to JOLTS data released Wednesday.
That figure is a slight slowdown from the November 2021 peak of over 4.5 million — but still well above the pre-pandemic ceiling of 3.6 million set in July 2019.
The increased quitting in the pandemic era became known as the “great resignation.” In 2022, 50.5 million people quit their jobs – an annual record from 2021.
4. The setting was moderated
Attitude remains strong but has slowed. The hiring rate and the number of new hires have cooled since February 2022; they are roughly at the level of February 2020.
That’s not necessarily a bad sign — the job market was strong even in the run-up to the pandemic.
Businesses are adjusting to higher interest rates and the prospect of a recession — not necessarily through mass layoffs, but through less aggressive hiring, Zandi said. Data suggests employers are allowing jobs made vacant by workers leaving to remain unfilled, he said.
5. Wage growth is high but slowing
Wages are rising at a historically fast rate — particularly for those changing jobs. But even here there is a cooling trend.
Wages for private-sector workers grew about 4% on a yearly basis in the fourth quarter of 2022 — above the pre-pandemic pace but below 6% in late 2021, Bunker said. He analyzed labor cost index data released on Tuesday and excluded incentive-paid jobs, which can be volatile.
“The slowdown is definitely there,” Bunker said of wage growth.
Average hourly wages in January slowed to an annual growth rate of 4.4%, according to Friday’s jobs report, falling from 4.6% in December and 5.1% in November.
“It may not be as easy today as it was a year ago to find a better-paying job,” Zhao said. “But there are still opportunities out there.”
6. The labor market is “out of balance”
This slowdown in wage growth is intentional. The Federal Reserve is aiming to reduce wage growth to what it believes to be a more sustainable level – one that doesn’t fuel high inflation.
Fed Chair Jerome Powell said on Wednesday the labor market was “very, very strong” on job creation and wages – but also noted that it was “out of balance”. That’s largely because employer demand for labor “substantially exceeds the supply of available labor,” Powell said, underpinning rapidly rising wages.
The Fed is trying to dampen the job market without triggering a recession – a so-called “soft landing”.
A cut in wage growth to 3.5%, as measured by the employment cost index, would be in line with the Fed’s long-term inflation target of 2%, Zandi said.