‘A unique rebalancing phenomenon:’ The current state of the job market
We’re facing a new job market normal heavily impacted by the pandemic, in which employment trends are harder to predict and understand. But last week’s labor statistics help paint a picture.
The number of job openings in the U.S. shrank for the second month in a row, setting a new three-year low, according to the U.S. Labor Department’s Job Openings and Labor Turnover Survey (JOLTS). Meanwhile, the pace at which people voluntarily leave jobs is at a four-year low.
“The job market is not back to the old normal,” said Julia Pollak, chief economist at ZipRecruiter. “It’s at a totally new normal.”
We spoke to workplace experts and economists to get a better understanding of what these latest figures tell us about the labor market today.
Pollak noted the contradiction of the data in the JOLTS report. While the number of job openings “suggests softening demand for workers, the increase in hires and quits implies quite the opposite — resilient demand and plentiful opportunity,” she said.
Noah Yosif, chief economist at the American Staffing Association, calls what’s going on with the labor market a “unique rebalancing phenomenon.” Hiring is reasonably steady, despite job seekers’ complaints that are focused on a supposed cooling economy.
“In a nutshell, the labor market has proven itself to be pretty resilient,” said Yosif. “The increased cost pressures like inflation and interest rates are still slowing down labor market activity, but not to the extent that a lot of people thought would be the case.”
Vacancies remain at a high level, with layoffs falling and more people quitting their jobs, both signs that some job seekers are confident they can find opportunities elsewhere. “Workers continue to enjoy an unusual degree of job security,” said Pollak. Specifically, U.S. job openings came in at around 8.1 million in April 2024, which means job openings are now down 35% from their 2022 peak.
At the same time, the U.S. Bureau of Labor Statistics announced on Friday that the U.S. economy added 272,000 jobs in May, more than what was expected. And wage growth rose .4% from April, and 4.1% from this time last year — although the surge was largely driven by health care.
“When you look at those headline numbers, they sound really good top line, but when you look at things by sectors, what you realize is growth is more concentrated,” said Yosif. “These opportunities are limited to workers who have specific skillsets and backgrounds. That’s what really puts into perspective this notion of resilience. It’s doing much better than what people expected it to do, but inflation and interest rates are still wearing things down.”
While people with jobs in some sectors are getting paid more, the unemployment rate did tick up to 4%, the highest level in two years.
Simply put, between layoffs, hires, and resignations all down, there is less churn in the labor market right now. It’s dampening employees’ views who are stuck in a job they don’t like and want to leave, or are unemployed and job seeking.
“It’s becoming both a slower labor market with less churn and a more competitive labor market with more labor competition,” said Pollak. “There’s more workers competing for fewer new opportunities.”
This greater competition could mean you “search for longer, do more interviews, set up more applications, or make a bigger investment in skills to be a more competitive candidate,” said Pollak.
By now we know that the pandemic changed the rules of the labor market, with shifts like the great resignation a couple of years ago, a rejuvenated push for work-life balance, and new ways of working including the AI boom. These are all “new conditions upon which the labor market is operating,” said Yosif.
The adoption of AI is a big one that Pollak and Jacqueline Barrett, an economist at data advisory and consulting firm The Bright Arc, are watching.
“It could be that companies are holding off on hiring young new paralegals and instead checking out how close they can get to the kind of brief that a legal intern or paralegal would draft with AI tools,” said Pollak, as an example of how AI could impact the labor market.
Barrett tracks the Census Bureau’s survey that details AI adoption across companies. According to that survey, for September 2023 to February 2024, bi-weekly estimates of AI use rate rose from 3.7% to 5.4%, with an expected rate of about 6.6% by early fall 2024.
“[Generative AI is] still relatively low in adoption, but the rate firms are starting to use it is increasing pretty rapidly,” said Barrett. “It’ll be interesting to see how that affects the job markets.”