Of the 517,000 new jobs created last month, the service sector contributed 397,000, according to an ... [+]
The strength of the labor market may be faltering, according to data from LinkedIn’s State of the Labor Market. The new report conducted by the career-oriented social media platform shows hiring on LinkedIn dropped by 23% year-over-year in the United States in January.
The report shows that the number of posts by members mentioning the words “layoff” or “retrenchment” on LinkedIn soared. Posts referencing “open to work” increased by almost 20%. These indicators reflect that the labor market is cooling, beyond the ongoing layoff announcements from industries that saw massive overhiring during the pandemic, Rand Ghayad, head of economics and global labor markets at LinkedIn, reported.
There was a drop in the ratio of job openings to active applicants over the past few months, evidencing a hiring slowdown. Ghayad pointed out that labor market conditions vary by industry. For instance, any active LinkedIn user over the last six months has seen a daily flurry of people with an #OpentoWork banner on their profile, sharing their heartbreaking stories of being laid off and asking for help in finding a new job.
In stark comparison to LinkedIn’s study, the majority of new jobs added to the U.S. economy in January was in leisure and hospitality (128,000), according to the Bureau of Labor Statistics’ monthly employment summary. Of the 517,000 new jobs created last month, the service sector contributed 397,000, according to an analysis by ZeroHedge. Another sector that added the most jobs since September was food and beverage, with almost 100,000 new hires. Additionally, government jobs increased by 74,000. The number of people employed part-time for economic reasons was 4.1 million. These individuals were characterized by the jobs report as people “who would have preferred full-time employment, were working part-time because their hours had been reduced or they were unable to find full-time jobs.”
Making Sense Of LinkedIn’s Perspective And The U.S. Jobs Report
The LinkedIn report conflicts with the recent U.S. jobs report. The U.S. economy added 517,000 jobs, blowing away economists’ predictions. The January numbers make it look like the U.S. economy is doing amazingly well, with record-low levels of unemployment and a tight job market. However, the big caveat that largely goes undiscussed is that the vast majority of new roles created were part-time, in the services industries and many people juggled several different gigs.
This data doesn’t disparage the restaurant and service industry workers, who have difficult jobs at mostly low wages. Most people presume that the jobs report represents full-time, permanent roles with health benefits, insurance coverage, vacation and paid time off. The divergence shows that the labor market looks like it's booming—and it is within the service, leisure, hospitality, warehouse and related sectors—whereas the LinkedIn data shows retrenchment in hiring and a more negative outlook.
Ghayad isn’t predicting an outright recession, but expects the economy to slow further in 2023, while inflation is likely to moderate as labor markets soften and wage pressures abate. On LinkedIn, Ghayad said, “The U.S. labor market is starting to normalize with a slowdown in hiring, quits and wage growth.” He added, “Companies have started to tighten their belts and take a more judicious approach to recruiting.” While hiring was down “across almost all countries” on LinkedIn, U.S. hiring slowed more than most.
According to Layoffs.fyi, more than 340 tech companies laid off 103,767 employees in 2023. This doesn’t account for the onslaught of layoff announcements that followed tech, in industries ranging from media to real estate. The most impacted industries are vulnerable to increased inflation and higher interest rates.
The unemployment rate might be different than reflected in the monthly jobs report. Highly paid tech workers, such as software developers, received lush severance packages and most likely didn't need or want to face the stigma of applying for unemployment benefits to only receive a few hundred dollars compared to their high six-figure compensation packages.
Although it may seem like many tech workers are losing their jobs, on a positive note, they are finding re-employment relatively quickly in a still-tight job market. The Wall Street Journal reported most laid-off tech workers are finding new jobs shortly after beginning their search, according to a recent ZipRecruiter survey.
The study shows that nearly 80% of downsized tech workers found new roles within three months of beginning their job search. On an encouraging and somewhat surprising note, about 40% of previously laid-off tech workers found jobs less than a month after they began searching, the ZipRecruiter data showed.
Questions Over The Methodology Of the Jobs Reports
In MarketWatch, Steve Englander, head of North American macro strategy at Standard Chartered, did a deep dive into the Labor Department’s Quarterly Census of Employment and Wages numbers. The Philadelphia Fed’s analysis of QCEW data found that the second quarter of 2022 jobs was overstated by roughly a million. Englander pointed out that the household survey—the methodology of the jobs report used to calculate the unemployment rate—shows a softer jobs picture than the payroll number suggests. The household report also indicates that nearly all the jobs created over the last year are part-time. The Philadelphia Fed model is new. Given that the Philadelphia Fed just started publishing results from its own internal model, it’s probably right to take this report with a grain of salt.
JOLTS Reports
The U.S. also has another report that seeks to determine how many jobs are open and available. The number of job openings increased to 11 million, according to the most recent Job Openings and Labor Turnover Summary (JOLTS) report. It collects data from employers about their businesses' employment, job openings, recruitment, hires and separations. JOLTS defines “job openings” as all positions that are open (not filled) on the last business day of the month.
These new openings, similar to the traditional U.S. jobs report, were predominantly in the food services (409,000), retail trade (134,000) and construction (82,000) industries. The information sector saw openings decrease by 107,000, which dovetails with LinkedIn’s analysis. The data correlates with both the jobs report, which showed the increase in blue-collar and frontline service providers, and the plunging number of jobs open for white-collar professionals.
The report indicates that as of January 21, 18.4% of employed U.S. adults and 20.1% of prime-age employed U.S. adults said they were actively applying for new positions. While job-search activity in some industries, such as tech and finance, has cooled off in recent months, workers in industries like retail, where the job market remains hot, are still looking to make a move.
