Hours before many Americans took off for the long Labor Day weekend, Summer’s final hurrah, the labor powers-that-be released the August labor reports. As usual, some took the numbers as caution signs for the economy and others as positive. We asked Patrice & Associates CEO Brian Miller to help us make sense of it all.
CCG: Brian, the numbers go up, the numbers go down. You’ve spent decades in the staffing business. What should we be looking for?
Miller: Whether the numbers go up, down, or stay the same, there is always a story and, with that, a prediction. I like to look at the numbers from a practical standpoint in terms of how hard (or easy) it will be for hiring managers to find quality people and keep business engines humming. That impacts the economy just as much, if not more, than the implications of the raw numbers.
CCG: True, so what do you make of the economy predicting 170,000 new jobs in August and actually adding 187,000 with unemployment inching up to 3.8% from 3.5%?
Miller: Let’s start with the job creation numbers. I'm in the same camp as Nela Richardson, the chief economist for ADP, who said, “This month’s numbers are consistent with the pace of job creation before the pandemic.” In other words, job growth has bounced back to what was normal before the “black swan” pandemic event.
CCG: Remind us what was normal before the pandemic.
Miller: In January 2019, pre-pandemic, the national unemployment rate was 4.0%. In January 2020, just before the pandemic, the national unemployment rate was 3.6%. Hiring managers complained about their difficulty recruiting in 2019 and early 2020 before the bottom fell out in February 2020. Now, here we are in 2023, and the unemployment rate is 3.8%. What I know to be true is that it was a tight labor market before the pandemic, and it’s a tight labor market now.
CCG: So you’re saying the economy is still generating plenty of jobs?
Miller: Absolutely. According to the Bureau of Labor Statistics JOLTS report, job openings are down to a seasonally adjusted 8.827 million in July from 9.165 million in June. Let that sink in. It was almost two jobs, now it's 1.5 jobs available for every unemployed person. This slight chill is welcome news for the economy because it lessens the chance of a steeper recession. And when I say slight chill, I mean put a light sweater on. We are not in the deep freeze.
CCG: But aren’t we teetering on the edge of a recession?
Miller: Well, that’s what they keep saying, or at least some keep saying, but given the labor numbers, I’m on board with Morgan Stanley’s top economist, who said last week that the US would likely dodge a recession. It appears the fed’s easing policy is having an effect, and perhaps we are headed for that elusive soft landing. Even Goldman Sachs slashed its outlook for a US recession and based that opinion on, as they put it, “…solid jobs.”
CCG: Sounds like good news.
Miller: In one way, it certainly is. More companies are hanging on to people, and the takeaway is that we are not seeing the widespread job losses that many predicted based on the tech layoff wave earlier in the year. That seemed to be sector-specific, and now, it appears many firms are building back up and improving their talent in the process. It’s a sector reshuffling.
CCG: So, broadly speaking, job loss is minimal?
Miller: It remains a workers’ labor market. According to Julia Pollak, chief economist with online job site ZipRecruiter, “Layoffs and discharges are 17% below what they were before the pandemic.” Yes, she said below. “The Labor Leverage Ratio, which relates the number of people who quit versus the number who were discharged, is 29% higher, meaning layoffs are not happening.” Combine all that with the fact that there are 3 million more open jobs than unemployed workers to fill them, and I think you have the story.
CCG: Patrice & Associates are very connected to the hospitality industry. What’s going on in that sector specifically?
Miller: Employment continued to trend up in several sectors, including leisure and hospitality, according to the Bureau of Labor Statistics report. August saw an addition of 40,000 new jobs. This is on top of gaining an average of 61,000 new jobs per month over the last 12 months. While employment in the sector remains below its pre-pandemic February 2020 level by 290,000 jobs or 1.7 percent, the continual steady job growth has it heading in the right direction. We’re finding that the jobs are there, and we’re working to fill them. Let’s just say if you’re qualified and you want to work in this sector, you have choices.
CCG: Are there any macro trends that you see driving this continual “shortage” of workers? It used to be the other way around. More workers than jobs.
Miller: Yes. Unless you’ve been working in this industry daily for decades, I believe there are three key macro trends that are easy to miss, or at least discount. The first one is demographics. The Baby Boomers have left the workforce or are retiring, and the generations behind them are not large enough to fill the holes. The second trend is decreased immigration. That means the pool of new Americans isn’t sufficient either. Finally, the third trend is that the US birth rate has been in a free fall for the last several decades.
CCG: What’s your advice for companies trying their best to compete and grow?
Miller: Recognize that this is the new normal, and it is a very different employment landscape than it was during the 1990s and 2000s. It's a competitive world landing top talent. We are adjusting to a declining population, which means companies will not only compete on typical things like price and products. They’ll be first and foremost competing for people.