The August 2023 jobs report from the U.S. Bureau of Labor Statistics paints a picture of a job market that’s cooling, but still robust, according to economists. Other federal data, such as figures on quits and job openings, align with this perspective, indicating a Goldilocks-style labor market. In this article, we’ll delve into six key insights about the current job market that both jobseekers and policymakers should consider.
1. Job Growth Is Slowing
The August report revealed the addition of 187,000 jobs to the U.S. economy, marking a noticeable deceleration. The three-month average for August stood at 150,000 new jobs, down from 201,000 in June. However, this figure closely aligns with the 2015-2019 monthly average of 190,000, demonstrating a degree of normalcy. Furthermore, job gains in August spanned various industries, indicating a broad-based recovery.
Economists caution against immediate alarm over the slowdown, attributing part of it to one-off factors like ongoing strikes in Hollywood and layoffs in the trucking sector due to the bankruptcy of Yellow Corp. Additionally, monthly job growth still surpasses U.S. population growth, with varying estimates of the “neutral” pace ranging from 70,000 to 150,000 new jobs per month.
2. Unemployment Rises for a Positive Reason
August witnessed a notable increase in the unemployment rate, jumping from 3.5% in July to 3.8%. However, this rise isn’t indicative of negative job market trends. In fact, employment itself increased during this period. The spike in the unemployment rate primarily stems from a surge in the number of individuals actively seeking employment, expanding the labor force and, by extension, contributing to the appearance of rising unemployment.
Historically, an unemployment rate below 4% still reflects favorable labor market conditions for jobseekers and workers, even for those who traditionally faced employment barriers.
3. The Great Resignation Is Over
The much-discussed “great resignation” trend that characterized the pandemic era appears to be waning. High quit rates observed in 2021 and 2022, driven by ample job opportunities and increased pay elsewhere, have reverted to pre-pandemic levels. While this normalization is seen as positive, certain sectors have witnessed a decline in quits rates below pre-pandemic levels, possibly indicating decreased worker confidence in job prospects.
4. Job Openings Approach Normalcy
Job openings, indicative of employer demand for workers, remain historically high but have gradually decreased. July recorded around 8.8 million job openings, the lowest since March 2021, yet still surpassing pre-pandemic levels. This trend signifies the gradual normalization of labor market conditions.
5. Wage Growth Slows but Keeps Pace with Living Costs
Wage growth, although cooling compared to recent decades, continues to be strong. In August, the average three-month growth rate stood at 4.5% on an annualized basis, down from 4.9% in the previous month and a peak of 6.4% in January 2022. However, this slowdown is coupled with a notable positive development: “real” wages, which account for the cost of living, have begun to rise after a period of decline. For the average worker, inflation had outpaced wage growth for two years, eroding living standards. But since May, a combination of lower inflation and robust wage growth has reversed this trend.
6. Jobseekers Face Increased Competition
While the labor market remains strong, jobseekers should be prepared to up their game. Leverage that was once “unprecedented” has dwindled, leading to heightened competition for open positions. Opportunities are still available, but finding them may require more effort and speed in the application process.
In summary, the current job market presents a nuanced landscape with both strengths and areas of change. Understanding these dynamics can help jobseekers navigate their employment journey effectively, recognizing that while challenges exist, opportunities persist.