It’s that time of year when business leaders forecast and budget for the new year — and that means pulling out the crystal ball to try to predict trends and prepare contingencies. We’re all watching the Fed raise interest rates to try and control inflation. Depending how hard the Fed pulls the interest rate lever, it could impact jobs and the gig market. Here’s what we’re watching for in the new year.
The most recent jobs report in September shows the unemployment rate edged down to 3.5%. That sounds positive until you start peeling back the details related the current post-pandemic, economic landscape.
Headlines this year addressed increasing pay rates resulting from a decreased job seeker talent pool. Where did people go? A September New York Times article dissects this question. The deep dive into data shows:
More women are returning to the job market than men.
College-age students are job hunting at a pace on par to pre-pandemic times.
People of retirement age who were staying in the workforce dropped out at disproportionate rates and haven’t returned.
The gap in number of workers seeking jobs is down due to Covid-related deaths, with some 260,000 working-aged people having passed away.
A report from the Brookings Institute released in January 2022 shows some 16 million people have long Covid, with about 4 million leaving the job market.
This year has been focused on pandemic recovery. With fewer people seeking jobs, it seemed to be a buyers’ market. In March, a record 11.5 million jobs were available due to businesses reopening, returning to workplaces and the public becoming more comfortable returning to travel. The jobs open rebound appears to be falling, with the August BLS report showing 10.1 million open jobs. What do all these stats and facts mean for the new year?
A shrinking economy historically does not add jobs. Those of us who lived through the 1970s painfully recall high inflation and an aggressive Fed that raised interest rates, which hit 20%. By the early 1980s, inflation fell to 3%. But jobs were a casualty, with nearly 4 million people becoming unemployed. We hope the current Fed board keeps this in mind as they try to control inflation.
Looking back through history and recent years, our team sees three key staffing trends on the 2023 horizon.
Workers will reenter the job market. Bureau of Labor Statistic data shows the number of people who want a job has increased from February 2022, which at the time was around 5 million. The September report shows 5.8 million job seekers. Shortages for skilled and semi-skilled labor will still exist, but I think shortage will be impacted by expiring state Covid assistance measures. As extra benefits continue to conclude, more workers will need to rejoin employment rolls.
Wage increases will plateau. As recession takes a firmer hold of economy in 2023, wage increases will start to plateau with limited growth. The cost of wages increasing is one factor behind inflation. Coming out of pandemic lockdown, the demand for workers was high, and employers increased wages to lure new talent. As the economic figures in this article outline, the number of jobs open is falling. This limited growth will support steady wages.
Staffing partners will fill peaks. During a recession, business leaders look at line items to determine how to manage finances. Too often, headcount is cut with employers trying to make do with fewer people. Company leaders who might need to downsize the workforce will use staffing partners labor to fill in the “peaks” within their revenue flow. Start those conversations with a staffing partner early to be prepared.