Hidden Messages in the Job Market
Navigating the job market in 2023 can be a challenge for both job seekers and employers. With headlines about layoffs, resignations, and economic uncertainty dominating the news cycle, it can be difficult to plan for the future. However, there are ways to understand the hidden messages of the job market and make informed decisions as we move forward.
The good news is we have created a short road map to help you understand the quirks of the current market, what is causing the twists and turns, and how you can use this learning as we move further into the new year.
The Four Horsemen of the Job Market
There are several factors that affect the job market. In today’s market, there seems to be four key issues that are at odds with each other: labor force participation, unemployment, wages, and inflation.
Labor force participation refers to the number of working-age adults aged 16-64 who have a job. The labor force does not include active-duty military, incarcerated persons, or people who are institutionalized and unable to work.
Pre-pandemic, the labor force participation rate was 63.4 percent, then dropped to 60 percent in April 2020. It has slowly crawled back to 62.1 percent, still very different from the 67.3 percent we saw in 2000.
Within the labor force participation rate lies the unemployment rate, or the share of this labor force not working but actively seeking a job. The current unemployment rate is 3.7 percent; it has fluctuated between 3.5 and 4.0 percent since December 2021.
When you have a high participation rate and a low unemployment rate, the job market is strong. Today, we have a low participation rate AND a low unemployment rate—perhaps too low.
Economists argue that when U.S. unemployment drops below 5 percent, the result can be decreased productivity (check), increased wages (check), and inflation (check again).
As the labor participation rate shows us, we have a shortage of workers since the pandemic due to continuing childcare issues, illness, and baby boomers retiring in the millions each year. As job growth climbs, employers tussle over available workers leveraging the greatest tool they have: wages.
Predictably, companies are increasing wages as much as 5.1% to keep and attract talent. Unfortunately, inflation is increasing as well, to the current rate of 7.7 percent.
This means the while salaries may be higher, those increases are being scavenged by inflation. As Federal Reserve Chair Jerome H. Powell explains, “If you want to have a sustainable, strong labor market, where real wages are going up right across the wage spectrum, especially for people at the lower end, you’ve got to have price stability.”
It is this tangled web that makes the job market so difficult to predict. We have several factors that seem good on face value (like low unemployment and higher wages), but that when considered alongside a decreasing labor participation rate and increased inflation, actually turns out to be a potential liability.
Job Opening VS Open Jobs
We then make the waters even murkier when we take this low unemployment rate conversation and add in a dash of job growth banter for good measure.
How often have we heard that there are jobs available for every unemployed person? Unfortunately, that is very misleading.
Where we see the biggest discrepancies in job openings lies in industries versus positions per se. Industries ranging from finance and big tech to retail chains and media companies have all recently announced significant layoffs. On the flip side, lower-paying industries such as education, nursing, and hospitality are struggling for workers.
As such, it may be literally accurate to say there are open jobs for everyone looking for a job, it is not a realistic statement. It is unlikely that someone laid off from a tech company is going to move into childhood education or the hotel business.
At least not without some research and planning.
An Eye Toward Later in 2023
As you see, job market numbers can seem convoluted at best. There are so many factors that affect the outcomes that you can end up feeling confused about what you are reading versus the reality around you.
Fortunately, there is one area of the market you can and should pay attention to: the growth and decline of key industries.
As we move deeper into 2023, there are several industries that have and will continue to grow. Similarly, there are targeted skill sets that will also be in high demand.
Industries for 2023:
- Hotels/accommodations and food service
- Leisure and hospitality
- Health care and social assistance
- Arts, entertainment, and recreation
- Construction
Key Skill Sets for 2023:
- Digital marketing
- Social media
- Web development
- Customer centricity
- Data literacy
For people who already have experience in these areas, this list is a welcome sight. But, for those whose experience lies outside these industries and skills, take note.
For job seekers, it’s important to identify transferable experience, skills and find areas where they may need to augment their skills. In many cases, there are even free classes to bolster skill sets in areas where you feel you could improve. Also, working with a skilled recruiter like McKinley Marketing Partners can help job seekers navigate their way through the job application and interview process and make informed decisions about what may be needed to help put your best foot forward.
As we move deeper into 2023, the job market will more than likely remain complex and often challenging to predict. But, by understanding some of the hidden messages in the job market, and focusing on some of these key areas and opportunities, you can help position yourself for job success during the remainder of the year.
