2023 labor market: What job seekers, hiring managers should know
With economic uncertainties this year, businesses have been laying off employees, adjusting budgets and preparing for the worst. Now that we are past the halfway point in the year, the U.S. labor market may be turning a corner. To shed some light on the current market, our Regional Vice President Kevin Erickson has some updates and takeaways for you: Last week the Bureau of Labor Statistics put out its June JOLTs and July jobs reports. While both were fairly benign from the month prior, they were a good summation of the U.S. labor market in the first half of the year. Coming off the highs of the “Great Resignation” in 2021 and 2022 the number of open jobs, pace of hiring and overall employer/employee confidence has cooled in the first half of 2023. Macroeconomic uncertainty has put a malaise on hiring, even though the number of open jobs is well above pre-pandemic levels. Meanwhile, the unemployment rate is hovering at 3.5% and remains at almost a 50-year low. Here's what the data showed:
- The number of open jobs in June was 9.58 million down from 9.62 million in May.
- The quits rate (voluntary resignations) was 3.77 million, down from 4.07 million in May.
- In July, employers added 187,000 new jobs, below estimates of 200,000 and the lowest since December 2020.
- The unemployment rate stayed compressed at 3.5%.
- Wage inflation was up 4.4% over the same month from 2022.
So where is the U.S. labor market at and where is it heading?
This is the question many are asking. Are we headed for a recession? Have we been in a pullback already? Is it possible the Federal Reserve’s goal of a soft landing is in sight? Time will tell, but the data suggests the pandemic and post pandemic hiring rush is in the rear-view mirror and a more subdued hiring pace is to be expected in the short term.
In 2022, the U.S. economy added 6.3 million new jobs. Through July of this year, it has added 1.8 million jobs – a clear pull back in demand. All of that said, while it’s evident companies are hiring less, there are still almost 10 million open jobs (there were 6.9 million in February of 2020, before the pandemic started) across the country. For those that have been impacted by layoffs, there is more opportunity to find a new role than in most periods of slower hiring.
What does it mean for IT and digital skillsets?
While many companies have taken a more conservative approach to their technology and digital investment in 2023, the amount of pressure felt by all of them to keep up with innovation and transformation will continue to spur hiring in the months and years to come. The BLS expects IT employment to grow by 13% over the next 7 years, much faster than the average for all other occupations. So, if you’re a professional with a technology or digital background, things look promising for you even if compensation trends cool a bit from the peak in 2021 and 2022. And while big tech right sized itself in early 2023, those IT and digital professionals who found themselves searching for new roles were welcomed by other industries who struggled to hire during the hiring boom of the past two years – some industry experts are calling this the “Great Reallocation” of talent. This means that for sectors unable to offer compensation packages or highly attractive projects and job descriptions in comparison to big tech, they are finally beginning to attract and retain talent due to the shedding of many jobs out of the tech industry.
Some final thoughts
While the data shows the economy is cooling, here are a few other things to keep in mind for the back half of 2023:
- There will continue to be demand for IT and digital professionals -- especially software developers, information security analysts, data scientists, Cloud/Dev Ops engineers and digital strategy leaders.
- While companies are still hiring, they are being more intentional with their interview process. They have more decision makers involved in vetting talent to ensure it’s a great fit for both parties. I recommend job seekers to be patient through the process.
- While there are less open jobs than last year, in-demand talent still has a lot of options to pick from, especially with the unemployment rate at 3.5%. Employers, before setting out to hire for a role (full time hire or contract), lay out an efficient hiring process to ensure you don’t lose your top candidate to a company willing to move faster and more efficiently than you.
- If you’re a job seeker, the more flexibility you have, the more consideration you’ll get from potential employers. Whether it’s the type of technology stack you work on, the industry you work in, the size of company you work for, where you work from (remote, onsite or hybrid) or what your salary is, these are some of the things that will open yourself up to roles companies are hiring for right now.