By: Gerelyn Terzo of Sharemoney
A recession seems to have been averted in 2023, but the economy is not out of the woods yet. With inflation still running hot and interest rates high, things are far from perfect. As a result, the labor market has been experiencing a reset in sectors from technology to e-commerce. There are also some pockets of strength.
In this article, we’ll explore some of the trends in the labor market, including where the layoffs are happening, while identifying resilient industries.
The unemployment rate currently hovers at 3,5%, with 236,000 new jobs added in March. While non-farm payroll jobs growth is not too shabby, it represents a declining pace in 2023. Meanwhile, consumer prices show little signs of easing, with the March inflation rate at 5%.
Image by Business Insider
Overall, the U.S. workforce has shed over 270,000 jobs year-to-date, an eye-popping increase of almost 400% compared with the year-ago period. The technology industry has largely fueled the layoffs, particularly among the big tech players.
There’s no shortage of job data, so we’ll start with a bright spot. The CompTIA Tech Jobs Report shows some encouraging data for March, when 197,000 tech-related jobs were added to the economy. The unemployment rate for the tech industry, in particular, hovers at 2.2%.
The CompTIA report offers a different vantage point than big-tech layoffs. Instead, it focuses on the big picture, where small and mid-sized companies pick up where their larger peers left off.
Within tech, the telecommunications segment sees the most layoffs while hiring unfolds in cloud services and software. Artificial intelligence (AI) jobs are growing in popularity, fueled by the rise of chatbot robot software like ChatGPT that threatens to disrupt many professional industries.
The CompTIA report reveals that job postings requiring AI-related skills represent about one-third of emerging tech job opportunities. Most AI jobs are cropping up across California, Texas, Virginia, New York, and Massachusetts.
According to Bloomberg data, the AI market is “red hot,” where engineering jobs command salaries over $335,000 for top talent.
However, as noted, big tech is the main culprit in the massive wave of layoffs that have hit the workforce this year, with close to 102,400 releases in the first three months of 2023. Technology is on pace for its single-worst year in terms of layoffs since the bursting of the dot-com bubble in the early 2000s, according to employment consulting firm Challenger, Gray & Christmas.
Class of 2023 Workforce
With graduation season just around the corner, the class of 2023 is in the spotlight. However, graduates might find it more challenging than recent graduating classes to land that first job as companies pull back on the hiring reins.
In the 2021-2022 stretch, major companies like Meta (Facebook’s parent company), Alphabet (Google’s parent company), and consulting firm McKinsey embarked on hiring sprees. Bidding wars emerged for top talent from these graduating classes in a highly competitive market, leaving these companies with inflated payrolls.
The pendulum began to shift when cracks started to show in the economy. Now the companies hiring aggressively in the past year or two have been forced to implement massive layoffs to save face with investors. Graduates are still targeting jobs at these elite companies but are careful not to put all their eggs in one basket.
Meanwhile, e-commerce giant Amazon is taking a different tack. It has delayed the start date for recent graduates by as long as six months as it looks for ways to cut expenses.
Postponing start dates is a trend that has gripped the workforce, one in which hiring companies are using other financial incentives to keep young talent. For example, some employers offer to pay tuition for recent grads to pursue higher education before being added to the payroll.
Where the Jobs Are
You may be wondering, if non-farm payrolls are on the rise, where is the hiring taking place? Among the sectors hiring most are leisure and hospitality, where more than 70,000 jobs were added in March, mostly at restaurants and bars.
Now that travel has rebounded, travel and leisure are seeing a resurgence. However, jobs in this market have yet to return to levels from before the pandemic.
The U.S. government is also hiring, where tens of thousands of jobs have been added in the public sector lately. In addition, the healthcare and transportation sectors have been adding jobs.
Now that the workforce has a taste of remote work after the pandemic, putting the genie back into the bottle is hard. However, a trend that could see corporate America moving jobs overseas instead is unfolding.
The pandemic revealed that many jobs could be done outside of the office, thanks to technological innovations such as Zoom or Dropbox, to name a couple. Workers came to demand flexibility, and employers were initially willing to oblige, especially considering the cost savings and tight job market.
Now remote work has reached another stage in which employers are increasingly looking abroad to fill open positions and save on costs like wages. For example, as of August 2022, a Fed poll revealed that 7% of senior managers surveyed were sending jobs overseas to respond to the remote work trend.
Stanford University Economist Nicholas Bloom is quoted in The Wall Street Journal as predicting that 20% of “U.S. service support jobs,” including roles like software developers, payroll specialists, and HR professionals, could be sent abroad in the coming ten years.
Separately, there’s also a trend of more workers voluntarily leaving their jobs, with roughly 4 million employees deciding to jump ship in February. These resignations usually reflect better job opportunities elsewhere.
Despite the uncertainty in the economy, the jobs market is humming along. Except for big tech companies, which overhired during a stronger economy, the labor market has pockets of strength. And while the employment outlook has cooled somewhat, it is still strong for jobseekers who know where to look.