- The US labor market is starting to show signs of cooling off as layoffs/discharges have increased by 6.6% over the last three months, while quits have decreased by 3.4%.
- Job openings were up in transportation, warehousing & utilities (+81K), arts, entertainment & recreation (+53K), federal government (+47K), and state & local government education (+42K) while the largest decreases were in durable goods manufacturing (-47K).
- There were 5.2 million more job openings than workers available, a slight decrease from the previous month of 5.3 million.
- The headline unemployment rate (U-3) increased slightly from 3.5% to 3.7% over July to August.
- The labor force participation rate increased from 62.1% to 62.4% over the same period, indicative of more people entering the labor force.
- There is a strong, positive correlation between layoffs and discharges to those employed less than 5 weeks, suggesting that Americans are still able to find work given involuntary terminations.
- The job finding rate, which is defined as the proportion of previously unemployed workers who found employment, increased MoM and YoY by 2.8% and 25.4% respectively.
- Wages remain below inflation as annual wage growth is 5.2% compared to annual inflation which is at 8.3%.
Job openings remain elevated
Job openings increased from 11.0 to 11.2 million this July, a 1.8% MoM increase and a 4.2% increase YoY, respectively. Since last month, the job openings to hires ratio remained the same at 1.7. There were 5.2 million more job openings than workers available, a slight decrease from the previous month of 5.3 million. Job openings were up in transportation, warehousing, & utilities (+81K), arts, entertainment, & recreation (+53K), federal government (+47K), and state & local government education (+42K) while the largest decreases were in durable goods manufacturing (-47K).
The ratio of job openings to job seekers increased by 6.1% MoM; however, it increased by 59.4% YoY. The ratio is at peak levels since the BLS started reporting this data in December 2000. Recent data from the New York Federal Reserve Bank shows that those over the age of 60 increased their expectation of finding a job by 4.6% MoM in comparison to those between 40 and 60 years old and those under the age of 40, with both groups experiencing a decline in their probability of finding a job by 1.4% and 3.7% MoM. In terms of education cohorts, those with some college increased their expectations of finding a job by 4.1% MoM in comparison to those with high school or less and those with a BA or higher, with both groups experiencing a decline MoM of 6.4% and 3.5% respectively.
The job opening rate for seven industries increased by more than 50 percent since February 2020, reinforcing the challenge employers are facing to fill vacancies. The largest increase in the job openings rate was in durable goods manufacturing of 100%, followed by transportation, warehousing & utilities, which experienced an 85% increase since February 2020. Construction experienced the smallest increase in the job opening rate of 21.1%.
Unemployment & Labor Force
The headline unemployment rate (U-3) slightly increased from 3.5% to 3.7% over July to August, while the labor force participation rate increased from 62.1% to 62.4% over the same period, remaining 1 percentage point below pre-pandemic levels. Alternative measures of labor utilization such as the (U-6) unemployment rate, which captures the marginally attached (discouraged workers) and those that work part-time for economic reasons, increased from July to August from 6.7% to 7.0%. The employment to population ratio, which is the proportion of the country’s working age population that is employed increased from 60.0 to 60.1 from July to August and remains 1.1 percentage points below pre-pandemic levels.
US labor markets continue to experience slack or inefficiencies in the economy; however, there are now 163,000 more civilians in the labor force, and the labor force participation rate is 1.0% below pre-pandemic levels.
The share of unemployed Americans who took less than 5 weeks to find a job decreased by 0.5% MoM; however, it increased by 46.2% YoY. In comparison, the share of Americans unemployed 27 weeks and over experienced a 49.2% decline YoY in comparison to those unemployed between 15-26 weeks who experienced a 2% decline YoY. Comparing the numbers to pre-pandemic levels, the share of unemployed Americans who took less than 5 weeks to find a job increased by 1.4% between February 2020 and August 2022, while the share of those unemployed between 15-26 weeks increased by 8.1% during the same period. There is also a strong, positive correlation between layoffs and discharges to those employed less than 5 weeks, suggesting that Americans are still able to find work given involuntary terminations.
The US Census Bureau’s most recent release of the Household Pulse Survey Data covering the time from July 27 to August 8 surveyed Americans on several issues, including employment and reasons why they were not working. Of the 100 million Americans surveyed, the top three reasons for not working outside of retirement (42 million), other reasons (20.8 million), and did not report a reason (6.0 million) include being sick or disabled (8.5 million), individuals not wanting to be employed at the time of the survey (4.9 million), and caregiving for children not in school or daycare (2.5 million). Although 2.5 million Americans reported that they were caring for someone sick or sick with the coronavirus, a recent Brookings Institute Report cited that almost 4 million Americans are no longer in the labor force due to long COVID.
Worker Displacement
The BLS recently released the Worker Displacement Survey, which covered a three-year period starting in January 2019 through December 2021 with 3.6 million workers displaced from jobs that were held for at least three years, increasing by 924,000 workers from the prior survey that covered the period of January 2017 to December 2019. Displaced workers are defined as persons 20 years of age and over who report that they lost or left jobs because their plant or company closed or moved, there was insufficient work for them to do, or their position or shift was abolished. Wholesale and retail trade, manufacturing, and leisure and hospitality exhibited large percentage of long-tenured displaced workers that were not in the labor force in comparison to those in the finance and information industries.
Separations increase, including quits and layoffs
Total separations – the summation of quits, layoffs/discharges and other separations decreased by 1.3% from June to July; however, these increased by 0.9% YoY. Quits decreased by 1.7% MoM; however, quits increased by 2.2% YoY. Quits were up in trade, transportation & utilities (+39K) and down in healthcare & social assistance (-73K) and state & local government education (-21K). Although layoffs/discharges decreased MoM and YoY by 0.1% and 2.9% respectively, the last three months show that layoffs/discharges have increased by 6.6% while quits have decreased by 3.4%, indicating signs of a cooling labor market.
The quit rate increased for professional & business services and financial activities MoM by 8.8% and 6.2% respectively, while the quit rate for information and education & health services decreased by 23.8% and 12% MoM. Quit rates remained the same for leisure & hospitality, arts, entertainment & recreation, and accommodation & food services MoM; however, all decreased YoY. Quit rates go down as average hourly compensation increases, evident for all industries except manufacturing, financial activities, professional & business services.
Labor Flows
The job finding rate, which is defined as the proportion of previously unemployed workers who found employment, increased MoM and YoY by 2.8% and 25.4% respectively, while the labor force participation rate increased by 0.5% and 1.1% during the same time.
In terms of gender, the job finding rate for women increased by a factor of 2.4 in comparison to men over the past year, while the increase in labor force participation rates were smaller YoY. The most recent BLS data shows that among marginally attached workers, 23% of women cited family responsibilities as a barrier to entering the labor force in comparison to 14.9% in August 2021; however, the percentage of women citing childcare and transportation as a barrier decreased from 67.6% to 57.8% during the same period.
Radancy collects data on candidate experience from survey data that comes from over 1M candidate experience surveys completed across our network of enterprise career sites, which serve companies with 5,000 employees or more. Recent data indicates that getting ahead in their career increased by 23.2% among females in comparison to males who experienced a 17.7% increase YoY. In contrast, interesting and challenging work increased by 30.0% YoY among males in comparison to females who experienced a 17.6% increase. Compensation & benefits and convenience have declined for all genders, indicating that candidates value non-monetary perks or cultural elements of work over monetary benefits.
Gains in Employment and Average Hourly Earnings
Leisure & hospitality and information experienced the largest gains in employment YoY of 9.1% and 5.8% respectively, while utilities experienced the smallest growth of 0.3%. In terms of wage growth, leisure & hospitality and information experienced an 8.6% and 6.0% increase respectively, while other services experienced the smallest gain of 2.5% YoY. Wages remain below inflation as annual wage growth is 5.2% compared to annual inflation, which is at 8.3%.
Immigration programs are temporarily relieving labor shortages
The H2-B program is one of a few programs under the purview of the Department of Homeland Security, U.S. Immigration and Customs Enforcement, which allows US employers to fill temporary non-agricultural jobs with foreign nationals assuming US workers are not available. Recent data shows that within sectors such as accommodation and food services, 34.7% of approved workers from the H2-B program from the first half of FY 2022 received hourly wages that fall between $14 to $15.99, aligning to industry hourly wage of $14.61 as reported by Lightcast. Other sectors such as finance & insurance and educational services employ temporary workers at higher wages in comparison to industries such as arts, entertainment & recreation, where one-third of the employed receive wages that are $9.99 and below, closer to the federal minimum wage of $7.25.
Inflation remains high
The consumer price index (CPI) increased by 0.1% MoM and 8.3% YoY, while the Core CPI, which excludes food and energy, increased by 0.6% MoM and 6.3% YoY. As the Federal Reserve continues to increase interest rates, inflation remains at the top of mind for many Americans. According to the New York Federal Reserve Bank’s most recent data, Americans that belonged to the cohorts of age 60 and over, high school educated, and had incomes under $50,000 experienced the largest decrease MoM of their expectations regarding inflation over the next year compared to other groups. The percent of Americans who held multiple jobs as a percent of employed increased by 4.3% YoY, outpacing disposable personal income, which increased by 2.3% YoY. Employers are also facing rising costs as the BLS’s recent release of 2022Q2 productivity and costs shows that unit labor costs in non-farm business sector increased by 10.2% in 2022Q2, which is hourly compensation divided by labor productivity. Hourly compensation increased by 5.7% and labor productivity declined by 4.1% in 2022Q2.
Economic Forecasts
The Federal Reserve will continue to increase interest rates as it aims to mitigate the impact of inflation on Americans everyday spending habits, including groceries and gas prices. The consumer price index (CPI-U) is expected to steadily decrease from 2022 to 2024, reaching a 2.4% decline by 2024 as forecasted by both the CBO and the University of Michigan – Ann Arbor.
The latest employment numbers indicate a labor market that is relatively tight with some optimism regarding a small increase in the labor force participation rate. According to the University of Michigan – Ann Arbor’s economic forecast, the unemployment rate will reach 4.3% by 2024 compared to the lower forecast of 3.7% made by CBO. The higher unemployment rate forecast is directly tied to the Federal Reserve’s ongoing monetary policy of increasing interest rates in attempt to cool down inflation and reach a 2% mandate.
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