In a recent article by SHRM that analyzes the most recent employment report from the U.S. Bureau of Labor Statistics, it is evident that the U.S. labor market is surpassing previous expectations. In January alone, U.S. employers added a staggering 353,000 new jobs, a number that far exceeded initial predictions.
According to Geno Cutolo, the president of Adecco North America, “significantly beating analyst expectations, the labor market represents the resiliency of the U.S. economy.”
Sam Kuhn, an economic data analyst at Appcast, shared his perspective on the labor market, describing it as a formidable force that remains far less impacted than anticipated by recession expectations, soaring interest rates, and inflationary pressures. However, he cautioned against drawing conclusions based on a single month of data, noting that January's figures often come with statistical peculiarities and acknowledging that the market is still experiencing a cooling trend compared to previous years.
According to Nick Bunker, economic research director for North America at the Indeed Hiring Lab, not only did employment gains in January significantly exceed expectations, but revisions to the 2023 data reveal that last year was stronger than initially believed. For instance, the gains in payroll for December saw a significant upward revision, jumping from 216,000 to 333,000.
Daniel Zhao, a senior economist at Glassdoor, calculates that these revisions have resulted in a boost in job growth projections for 2023. The number of jobs added is now estimated to be 3.0 million, surpassing the initial report of 2.7 million. This increase aligns with the total job gains seen during the 2014-2015 period and exceeds the average annual job gains observed from 2016-2019. It is worth noting that the revisions were particularly significant in the transportation and warehousing as well as professional and business services sectors, which experienced both substantial growth and subsequent challenges in recent years.
Experts have pointed out that interpreting employment data for January can be challenging, as it has consistently exceeded expectations in the past two years, potentially due to seasonal hiring practices.
The release of the impressive jobs report has sparked fresh speculation about the Federal Reserve's timeline for implementing interest rate cuts. However, it has already been confirmed that rate cuts are unlikely to be discussed or implemented at their upcoming meeting in March.
The Data By Industry
In 2023, there was a notable surge in payroll employment, with an average of 255,000 jobs being added each month. This impressive figure was largely attributed to the hiring spree in three key sectors: government, health care, and leisure and hospitality.
According to Bunker, job gains in January were widespread, with nearly two-thirds of industries experiencing growth or maintaining stability. This marked the highest level since January 2023.
ZipRecruiter’s chief economist Julia Pollak cites numbers bolstering this distribution claim. Even sectors like manufacturing and retail, which had weak job growth in 2023, experienced strong gains. The healthcare industry added 70,000 jobs, while professional and business services saw an increase of 74,000 jobs.
There was a positive trend in public-sector employment, with an increase of 36,000 jobs. However, this is still below the average monthly gain of 57,000 that was seen in 2023. Meanwhile, the information industry, which encompasses technology companies, the film industry, publishing, and telecommunications, experienced a growth of 15,000 jobs. Despite this, the overall employment in this industry has declined by 76,000 since reaching a peak in November 2022.
According to Cutolo, there is anticipation for ongoing expansion in the healthcare and financial services sectors, driven by the increasing number of job opportunities resulting from the aging population and the commencement of the tax season.
Employers are actively seeking to hire individuals for roles in IT, healthcare, and the public sector, according to Becky Frankiewicz, the president and chief commercial officer of ManpowerGroup. Additionally, there is a noticeable decline in retail and logistics following the holiday season, but this is offset by an increase in opportunities in the fields of IT, finance, accounting, and engineering. When considering the broader perspective, there is a clear trend of rebalancing in the job market following the pandemic. Although hiring may not be as robust as it was a year ago, it has shown consistent improvement and is currently in a better state than before the pandemic. Overall, there are now more job opportunities available for each unemployed worker, creating a stable and favorable environment for both employers and employees.
Staffing employment reflects a labor market that is both strong and cautious, said Noah Yosif of the American Staffing Association. “The market’s overall strength continues to create opportunities for staffing companies to address specific talent needs in the short-term, helping employers fill an estimated 9 million open positions, as well as to source and deploy talent for project-specific engagements.”
Unemployment Rates Hold
For the third month in a row, the unemployment rate remained flat at 3.7 percent. Ranging from 3.4 to 3.8 percent throughout 2023, it has not exceeded 4 percent for 24 months.
The measure of unemployment, which takes into account discouraged workers and individuals with part-time jobs for economic reasons, experienced a slight increase to 7.2 percent. However, the labor force participation rate remained steady at 62.5 percent.
“The share of workers that were employed part-time for economic reasons continued to rise, suggesting ongoing caution from employers to expand headcount too much,” Bunker said. “The employment-to-population ratio did increase over the month, but after declining in late 2023 has still not gotten back to last year’s peak level.”
Despite the attention given to high-profile layoffs, the number of job cuts remains relatively low. Although the latest data on weekly initial jobless claims indicate a slight increase in unemployment filings, it appears that companies are still reluctant to let go of their workforce in a highly competitive labor market.
Working hours are something to watch going forward, according to Pollak. “Average weekly working hours dropped to the lowest level since the pandemic recession,” she said. During periods of economic prosperity, the average work week usually spans from 34.3 to 34.6 hours. However, in January, the duration of the work week declined to 34.1 hours, marking the lowest figure since 2010, excluding the pandemic recession.
According to Pollak, when there is a decline in consumer demand, companies usually reduce employees' working hours as a first step before resorting to job cuts. The current reading of the work week serves as a warning sign for the economy, indicating that layoffs could be on the horizon.
Wages On The Rise
Average hourly earnings experienced an increase of 0.6 percent. Furthermore, on a year-over-year basis, wages rose by 4.5 percent, surpassing the initial forecast of 4.1 percent.
According to Zhao, the Federal Reserve may find the current rate of wage growth, along with the significant upward revisions, too high. However, there is potential for stronger wage growth due to improving productivity. On the other hand, the decrease in hours worked and quitting rates suggests that hourly wage growth may slow down in the upcoming months.
Final Thoughts
The January job growth, which defied expectations presents an opportunity for us to reflect on the resilience of our economy and the potential for growth. While we can't predict what lies ahead, we can help you prepare for any potential outcome. If you have any additional questions about what this job data might mean for your organization, Harger Howe Advertising is ready to help. For more information about Harger Howe Advertising, or to talk about strategies to make your company more competitive as an employer, please contact our President Mike Walsh at mwalsh@hargerhowe.com.
