Labor Market Strength Persisted Heading Into the Holidays

The labor market remained a key source of strength for households and the overall economy ahead of the holiday season, even as hiring struggles remained a headache for employers, the latest government data indicates.

The Bureau of Labor Statistics reported Wednesday that there were 10.5 million U.S. job openings on the last day of November, a figure little changed from the month before. The number of workers voluntarily quitting their jobs ticked up slightly, and layoffs were comparable to the previous month.

According to the bureau’s Job Openings and Labor Turnover Survey, or JOLTS, there were 1.7 open jobs for every unemployed worker near the end of 2021. Some experts caution that the vacancy rate should be taken with a grain of salt, since many employers may no longer be urgently recruiting, yet don’t see the harm in leaving a job listing posted online in case the right candidate comes along.

The State of Jobs in the United States

Economists have been surprised by recent strength in the labor market, as the Federal Reserve tries to engineer a slowdown and tame inflation.

  • Retirees: About 3.5 million people are missing from the U.S. labor force. A large number of them, roughly two million, have simply retired.
  • Delivery Workers: Food app services are warning that a proposed wage increase for New York City workers could mean higher delivery costs.
  • A Self-Fulfilling Prophecy?: Employees seeking wage increases to cover their costs of living amid rising prices could set off a cycle in which fast inflation today begets fast inflation tomorrow.
  • Disabled Workers: With Covid prompting more employers to consider remote arrangements, employment has soared among adults with disabilities.

The JOLTS release is what economists call a lagging indicator, telling more about recent conditions in the business cycle rather than about what might come next. Most economists expect layoffs to increase and the economy to slouch, with fewer job postings. But the persistence of vacancies in November underlines commentary from small businesses leaders and Fortune 500 chief executives alike, lamenting a dearth of talent to fill openings.

“The people shortage is systemic, and it’s fundamentally changing how businesses should prepare for economic slowdowns,” argued Ron Hetrick, a senior economist at Lightcast, a labor market analytics firm. “If the U.S. does see some sort of recession in 2023, it will be less about persistent worker displacement and more about employers finally being able to fill the roles they’ve had open for the past several years.”

Baby boomers are retiring. And with political gridlock set to pick up in Washington, some federal legislative proposals intended to expand the labor pool — like immigration reform or an expansion of child care support — are unlikely to become law anytime soon.

As inflation from sources like supply chain snags has cooled, policymakers and influential economic commentators have dedicated a larger share of their discussions to concerns about a labor market that in their view is “overheated,” or too strong for the overall good.

In his most recent news conference, Jerome H. Powell, the chair of the Federal Reserve, emphasized that the central bank was focused on bringing all dimensions of the economy, including the job market, into “better alignment” in an effort to slow price increases.

“We do see a very, very strong labor market, one where we haven’t seen much softening, where job growth is very high, where wages are very high, vacancies are quite elevated, and, really, there’s an imbalance in the labor market between supply and demand,” he said. “So that part of it, which is the biggest part, is likely to take a substantial period to get down.”

For roughly two years, millions of workers gained an unfamiliar degree of leverage as their talent became more valued or scarce, and they began quitting or bargaining for higher wages in greater numbers. That trend has been a lingering source of anxiety for a variety of business owners, who have had to contend with inflation, much like their customers, while balancing higher labor costs with their profit goals.

In November, the rate of workers voluntarily quitting jumped notably for establishments with fewer than 10 employees, potentially further evidence of how small-scale entrepreneurs are struggling to compete with bigger businesses to attract talent.

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