Labor Market Kept It Tight in 2022
Workers have had a banner year in 2022 — wages are high, employment is strong and job-hopping opportunities are plentiful, a streak that continued through the latest numbers released by the Bureau of Labor Statistics Dec. 2.
There’s still one more jobs report coming in January to cap off the year, but experts say it’s doubtful anything radical will happen to void this assessment: The labor market is still running hot.
“The key takeaway for 2022 is the labor market has lived to fight another month in terms of its tightness and strength,” says Nela Richardson, chief economist at ADP Research Institute.
When you combine a tight labor market with persistently high inflation and six rate hikes by the Federal Reserve this year, it also makes for truly bizarre economic conditions. And another rate hike is expected in December.
“The question before us all is whether or not the Fed can bring down inflation without terminating job gains and crushing wage gains,” Richardson says.
So far, nearly 4.4 million jobs have been added in 2022, according to Bureau of Labor Statistics data. Nearing year’s end, the staggering employment growth that began in 2021 is starting to show signs of slackening. But slowing down doesn’t mean bottoming out — it could mean a return to the business-as-usual of recent pre-pandemic years.
Unemployment has barely budged
Unemployment has stayed steady, fluctuating between 3.5% and 3.7% since March. In the latest report, unemployment was at 3.7% for November. It’s a steep drop from the early days of the pandemic when it historically peaked at 14.7% in April 2020. The current rate is on track with pre-pandemic levels — 3.5% in February 2020.
Wages are still increasing
Hourly earnings increased by 5.1% on average over the last year, according to the jobs report. The largest year-over-year wage gains from November 2021 to November 2022 were in:
Transportation and warehousing (+8.81%).
Leisure and hospitality (+6.38%).
Across-the-board wage increases show that earnings won’t necessarily go down in a straight line like the Fed wants. “It could be a bumpy path back to something more normal and tolerable and sustainable when it comes to inflation,” Richardson says.
Wage growth is likely to be with us for some time, Richardson says, largely because that growth is due to labor shortages during the pandemic that show few signs of decline.
Job openings are slowing compared with peak
After the job openings rate peaked in March 2022, there’s been a steady decline, according to the Bureau of Labor Statistics’ October Job Openings and Labor Turnover Summary, or JOLTS. But the job openings rate now is still significantly higher than before the pandemic.
Labor force participation isn’t what it used to be
The labor force participation rate — the percentage of the population that is working or looking for work — changed little in November (62.1%) and, indeed, has maintained roughly the same level all year, Bureau of Labor Statistics data shows. But when you compare with pre-pandemic rates (February 2020), the participation rate is 1.3 percentage points below what it once was.
What does that mean? Essentially, there are not enough workers to fill jobs.
“The labor force participation rate moved exactly the wrong direction; it didn’t go up, it went down, so it looks like labor shortages are another persistent outcome of the pandemic,” Richardson says.
Quit rates remain high
Quit rates demonstrate workers’ confidence in their ability to leave jobs and find new ones. The current quit rate, as of October 2022, was 2.6%, according to the latest JOLTS report. The latest rates are a slight decline — 0.2 percentage points — from the previous year.
The ability to move from job to job more seamlessly is another feature of the last couple of years that Richardson says is likely to remain durable.
“I think the evolution of the market is not a physically more mobile labor force but a digitally more mobile labor force of people; they’re going to job-hop at a higher degree than they were before,” Richardson says.
Unionization is growing
Worker organizing, which had its heyday in the 20th century, is making a bit of a comeback in the 2020s. This actually started before the pandemic, Richardson says.
“There were a number of teacher strikes across the country, so there has been this tension here between worker rights and organizing that isn’t necessarily new,” Richardson says.
Organizing, which started gaining steam in the last couple of years, continued in 2022: For the first nine months of the fiscal year (Oct. 1, 2021, to June 30, 2022), the National Labor Relations Board reported an increase of 58% in union election petitions — exceeding the number of petitions for all of fiscal year 2021.
Strikes have spread across employment sectors from Amazon to airlines to Starbucks and college campuses. Most recently, rail workers have been embroiled in a fight for wages and time off that ended with a congressional deal signed on Friday by President Joe Biden to increase wages — though a provision guaranteeing seven days of sick time was shot down.
“Workers, from inflation and cost of living putting pressure on wages, are trying to organize more. And we’re seeing workers more vocal about other things than pay, like autonomy, more flexibility in schedules and more clarity in schedules,” Richardson adds.
Women still haven’t quite come back
Employment among women took a nosedive during the early days of the pandemic and has yet to rise back to pre-pandemic levels the way the levels for men have.
As of November 2022, unemployment among women was at 3.3%, compared with 3.1% in February 2020. Unemployment among men is now lower than it was before the pandemic — 3.4% in November 2022 versus 3.5% in February 2020.
“Some of the jobs that gained steam, warehousing, delivery drivers — not to be too gender specific — they’re something men might gravitate to,” Richardson says. Meanwhile, more traditionally female-dominated fields like child care, health care and education are still lagging.
“Child care is critical right now because in a lot of ways that goes part in parcel with women going back to the labor market,” Richardson says.
Layoffs are concentrated, but more will come
Workers haven’t escaped layoffs entirely, with two sectors taking the biggest hits in 2022: tech and media.
Nearly 143,000 tech workers have been laid off in 2022, according to layoffs.fyi, which tracks layoffs in the tech industry. Some of the largest layoffs came from social media companies Meta (which owns Instagram and Facebook) and Twitter. Amazon has thousands of layoffs on the way. Meanwhile, entertainment giant AMC announced it would be laying off 20% of its workforce, and news organizations Gannett, The Washington Post and CNN commenced layoffs last week.
And more layoffs are expected in 2023 as the Federal Reserve continues its efforts to tame inflation. But Richardson says it’s likely that even in the face of layoffs, smaller firms may take up the mantle to hire from a pool of workers they were previously shut out from by larger firms.
The labor market recovery from the pandemic hasn’t been in lockstep, Richardson says. Early hiring was concentrated in tech and warehousing — tied to the boom of e-commerce — while the latter was driven by leisure and hospitality as consumers started feeling more comfortable with restaurants and travel.
“If there is a slowdown in the labor market in 2023, I would expect that you would see the same differences across industries,” Richardson says. That means, she says, areas like leisure and hospitality could continue to boom while layoffs could hit sectors that are more sensitive to rising interest rates, such as construction and manufacturing.
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