To find out where the labor market was heading this year, Engage2Excel’s president of recruitment solutions decided to ask ChatGPT what Artificial Intelligence (AI) thinks and here’s what it provided, which Darren thought was the understatement of the year:
“It is difficult to predict exactly what will happen to the labor market this year (2023) as it is influenced by a wide range of factors: including economic conditions, technological changes and government.”
One of the strongest labor markets on record took place in 2022. Everyone expected things to moderate, starting in the middle of the year, more than they did. A total of 4.5 million jobs were added in 2022, the second highest on record since 2021, with 6.4 million. There were 76 million total hires and the difference between the 4.5 million net jobs gained is all part of the great reshuffle/great resignation we have seen.
It’s important to note that there are more hires than net new jobs, and one thing that has kept that number from being even is the lack of available talent.
So, where do we go from here?
As we entered 2023, the labor market has been extremely tight. The data from the last quarter of 2022 and even January of 2023 paints a stark picture of the gap between available workers and job openings.
Job openings are a key indicator of labor demand. And January’s job openings report showed no signs that companies are letting up on hiring. Job openings held steady at 11 million, much higher than the 2015 to 2019 average of 6.4 million monthly job openings.
Job growth was widespread, led by gains in leisure and hospitality, professional and business services and health care. The unemployment rate fell to 3.4% from 3.5%, hitting a level not seen since May 1969 – 54 years ago!
What things will impact the remainder of this year?
We will see three main things:
The federal reserve has two mandates: 1. a stable money supply, i.e., control inflation, and 2. maximize employment. Two tough things to do. We have all heard, seen or felt that interest rates have increased. But the velocity with which they have been rising is substantial. They are already shifting how people spend their money.
We face everything going up, including debt, mortgages, car loans, credit card payments and housing. But housing is significant, mainly because you are trying to relocate people.
LACK OF AVAILABLE TALENT
Even with so many new jobs created, the United States still has over 10 million* unfilled jobs. In the 1950s, only 1 in 50 working-aged men were out of the workforce; now, it is 1 out of 10. The reasons for this are substance abuse, becoming caregivers, and giving up on finding the perfect job, complicated by decreasing wages. Men without college degrees have seen their inflation-adjusted wages decrease by 17%, while college-degreed men have seen their rise by 20%.
On the positive side, we have seen the return of women into the workforce, and they now account for 50% of the total U.S. workforce, back to where it was in Feb 2020 pre-pandemic. Growth in healthcare, education and hospitality hiring has helped fuel this recovery. And as of December 2022, 14% of construction roles were now held by women, the highest percentage ever.
REVERSION TO NORMS
Hiring and job quits are expected to normalize in 2023, close to the historical averages with 63.8 million (66.1 million average) and 38.5 million (38 million average), respectively. Wage growth should start to moderate, and the job market will remain competitive but expect fewer outliers and irrational pay.
What are some actions organizations can take?
You can begin by asking your stakeholders where their challenges are, becoming educated on the labor market challenges for your area, guiding stakeholders to become a trusted advisor and changing your mindset from surviving to thriving.
This post summarizes a recent webinar with Engage2Excel’s Darren Findley and Talent Board, titled “The 2023 Labor Market - Opportunities in a Challenging Landscape.” To watch the full webinar, click here.
* U.S. Bureau of Labor Statistics; values represent data and forecasts available as of January 2023