2023 is off to a fast and furious start. In the first week of the year, we experienced significant layoffs from powerhouse companies and a surprisingly strong December jobs report.
Lots of job market data to decipher, but for now, the job market has overcome high amounts of tech layoffs and demand for workers continues to increase.
- Amazon, Meta, Goldman Sachs, Salesforce, and other large companies announced significant layoffs. I believe many companies over hired after the pandemic. These cuts are not surprising and make good business sense.
- ADP reported that Private Payrolls increased by 235,000 jobs in December after rising 182,000 in November. Economists predicted the report would show an increase of 150,000 jobs. Many high-tech companies laid off employees towards the end of the year. This figure was surprisingly high and speaks to the pent-up demand of workers across most industries.
- “Fed officials are expecting a slowing in the job market given the big increase in interest rates last year,” said Stuart Hoffman, senior economic advisor at PNC Financial in Pittsburgh, Pennsylvania. “Right now the labor market is too tight for the Fed, and job growth is too strong.”
- Axios reported: “The headline unemployment rate, at 3.5%, matched its lowest levels in decades.” If you extend the calculation out a couple more decimal places, University of Michigan economist Justin Wolfers points out, “it was 3.468%, the lowest since 1969! “This is a welcome sight. The more people are working, the less there are labor shortages. Labor shortages are a key contributor to inflation.
- “US employers have strong hiring plans for the first quarter”, according to ManpowerGroup Employment Outlook, released today. The net employment outlook now stands at 29%, down 4% from last quarter and 12% year over year. The net employment outlook is calculated by subtracting the percentage of employers who anticipate reductions in staff from those who plan to hire.
- “This labor market continues to defy expectations with employers planning to add to their workforces across all key sectors for Q1,” said Becky Frankiewicz, Manpowergroup Chief Commercial Officer and North America President. “Those with tech skills will find themselves in particularly strong demand. The data does indicate some hiring slow-down in logistics and transport, yet we’re seeing employers being very intentional in where they pause hiring.”
- ManpowerGroup surveyed 6,000 US employers for the report. The report found that IT remains the strongest sector, with a net employment outlook of 52%, despite headlines about tech hiring and layoffs. The weakest outlooks are predicted by employers in communication services (18%); goods and services (15%); and transport, logistics, and automotive (5%). At the regional level, the strongest hiring intentions for next quarter are in the Northeast, with a net employment outlook of 50%.
- The economy continues to add a healthy number of new jobs, though the pace is moderating. Wages are rising, but not so quickly as to alarm economic policymakers. And more workers are entering the labor force, which — if sustained — could heal labor shortages.
- The data has positive developments both for American workers — who continue to have abundant job opportunities — and for Fed officials seeking evidence that their inflation-fighting efforts are starting to cool job creation and wage growth to more sustainable rates.
- It fell even as the labor force expanded by 439,000 workers, a welcome development on the supply front after months of little progress. More Americans working means fewer of the labor shortages that have contributed to inflation.
- A stunningly low jobless rate might raise some alarm bells at the Fed level over the possibility the job market is too tight, and that this could fuel inflation. But the labor force growth and benign wage data (more on that below) may take the edge off those fears.
- Employers are still hiring at a rapid pace — 223,000 in December — but slowing from early last year’s unsustainable numbers.
In summary, the demand for talent is strong, but as inflation rises, companies will be faced with spending decisions.
Best of luck to everybody as we navigate these waters together!