2022 may have ended in a sea of overwhelmingly negative layoff news, but new data shows promise that the damage was minimal. It could be a sign the 2023 job market will launch on strong footing, economists say, even with fresh staffing cuts announced this week.
In November, the same month rocked by headline-making staff cuts across Big Tech, the U.S. labor market posted a near-historic low of 1.4 million layoffs, or less than 1% of the workforce, according to the latest Labor Department data.
Meanwhile, there were 10.5 million job openings, or roughly 1.7 vacancies per available worker. Companies were just barely backfilling the share of people leaving, making 6.1 million hires in the face of 5.9 million separations, which includes both voluntary and involuntary terminations.
And all the momentum behind quitting has yet to die down: 4.2 million people called it quits in November, marking the 18th straight month where north of 4 million people voluntarily left their jobs.
Here’s how recent data could spell a pretty good job market in 2023:
As of November, layoffs were way below pre-pandemic norms for workers usually hit by economic turbulence, such as those in accommodation and food, construction and retail, says ZipRecruiter chief economist Julia Pollak.
But terminations have edged higher than pre-pandemic norms in information and finance. The tipping point goes back to July 2022, around the time the Federal Reserve started its aggressive interest rate hike campaign and recession fears really took off.
As a result, sectors sensitive to rising interest rates (like across finance and real estate) and ones hoping to borrow to grow at all costs (like tech) took big hits.
“In aggregate, layoffs are still way lower than pre-pandemic,” Pollak says. The combination of strong consumer demand in the face of high interest rates means “blue-collar workers have much greater job security, which isn’t the case in information and finance where white-collar workers have lower security.”
Recent mass layoffs around tech and finance are a result of companies over-hiring during a pandemic rebound around innovative (read: speculative) initiatives, like crypto and the metaverse.
In response, job-seekers are approaching 2023 by going “back to basics” and betting on jobs with proven security, Pollak says — especially around health care, legacy information technology and other “rock steady jobs where there’s demand today and in the foreseeable future.”
As of November, job openings ticked up for professional and business services, as well as manufacturing, and hiring shot up in health care and social assistance.
Job-seeker confidence has slid in recent months, and people are less likely to quit without a new job lined up. But despite economic worries, 4.2 million people quit their jobs in November.
Pollak says strong quitting numbers in the face of uncertainty suggests people are, in fact, walking out with a new offer in hand. High turnover could be the new normal, she adds, as remote and flexible work make it easier (and more advantageous) to change jobs.
Many businesses can’t replace quitters fast enough, like in accommodation and food. Even finance openings and information openings are up compared with February 2020. And that talent shortage is costing employers a lot.
So how do you “create” more job-seekers? You go after people who aren’t actively looking.
Some 36% of people who got a new job in last six months were recruited to the role, according to recent ZipRecruiter data, versus 20% pre-pandemic and as low as 4% in the 1990s, Pollak says.
“Companies are starved for talent and leaving money on the table because they can’t run at full capacity,” she adds, “and friends and family are begging them to come join their companies.”
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