The July report showed that employers in leisure and hospitality are briskly hiring, along with ... [+]
There was great anticipation leading up to the July jobs report. For months, economists, Wall Street analysts and politicians debated whether or not the United States was heading into a recession and what this would mean for Americans.
Upon Friday’s report from the U.S. Bureau of Labor Statistics, both sides of the aisle were amazed at the creation of 528,000 new jobs—more than doubling the 250,000 projected. The unemployment rate fell to 3.5%, reverting to its pre-Covid, 50-year low.
The good news felt like a much-needed relief for families to feel more confident in the U.S.’ economic recovery.
Job Growth Was Strong Across Almost All Sectors
Payrolls skyrocketed by 22 million over the past 27 months. The U.S. private sector saw growth with 629,000 positions above their pre-pandemic peak in February 2020. This means the labor market has recovered all the jobs lost in the pandemic.
The gains in employment were widespread. The July report showed that employers in leisure and hospitality are briskly hiring, along with restaurants and bars. There were payroll increases in healthcare, professional and business services, which include many white-collar jobs.
There Are Some Worrisome Issues In The Jobs Report
Unfortunately, if you dig deeper, all is not well. White-collar, full-time jobs were down by 71,000 over the month, while voluntary and involuntary part-time workers increased by 384,000.
The most significant contributions to job growth were front-line and part-time workers. Many of these folks preferred full-time roles; however, they were unable to obtain those positions. People were also pushed into part-time jobs because their hours were cut back.
Around 92,000 more Americans are working multiple jobs, 279,000 fewer people self-employed and there are 623,000 fewer people in the workforce compared with February 2020, as the workforce participation rate dropped.
The participation rate is a metric used to determine the percentage of Americans working or seeking a new job. The formula calculates the rate by taking the number of people aged 16 and older who are gainfully employed or actively seeking employment, then dividing it by the total working-age population.
The opting out of the labor force is attributed to Baby Boomers retiring, net immigration declining and concerns over Covid-19. All of these factors contributed to an estimated 2 million to 4 million Americans staying out of the market—bringing down the participation rate.
According to Layoffs.fyi, 65,962 employees were laid off in the tech startup space. LinkedIn reported that dozens of top companies across many sectors have enacted layoffs.
The Job Market Is Moving Toward Part-Time Work
It looks like the U.S. is heading into a different type of job market. More Americans are working part-time jobs, participating in the gig economy and needing to hold two or more roles to keep up with inflation.
This trend could foreshadow future problems as a large segment of the population is unable to earn sufficient funds to take care of their families as the costs of food, gas and rent are skyrocketing due to runaway inflation.
The Wage-Price Spiral
The July numbers are large enough to heighten concerns over a wage-price spiral. If this trend continues, it could be ruinous to the economy. Here’s what happens: workers demand more money due to the costs of inflation. In response, businesses need to raise their prices to compensate for the salary increases.
As costs spiral higher, workers notice that their paycheck doesn’t go as far anymore because the costs of goods and services have accelerated. Once again, the workers call for compensation increases to keep up with the rampant inflation rate. This could end up in a vicious upward spiral.
The Good News Is Bad News
The irony of a hot job market is that Fed Chair Jerome Powell views it as fanning the flames of inflation. Since his mandate is to lower inflation, Powell needs to substantially cool down the economy. This will be accomplished by raising interest rates. The intended consequence is that the companies will need to cut costs, which includes conducting layoffs and hiring freezes.
The good news is that there seems to continue to be an almost insatiable need for talent by companies across the board. This bodes well for job seekers. There should be plenty of jobs available until Powell aggressively ratches up interest rates. As inflation remains stubbornly high, it will continue to impact the lower-wage workers who will involuntarily need to take two or more part-time jobs to stay afloat.
What You Need To Do Now
Heed author Malcolm Gladwell’s advice and go into the office five days a week. It doesn’t have to be forever. While things are up in the air, you want to be seen and heard by managers and essential personnel. The proximity bias may save you when there is a call to cut jobs. A person who is always around will likely stand out compared to the dozens of small faces in a box on a weekly video call.
To fire-proof yourself, work toward being indispensable. Ingratiate yourself with the boss and key decision makers so that they wouldn’t want you to be on the layoff list. Become the go-to person that everyone counts on to get things accomplished.
If you currently have a job, hold tight. You don’t want to be the last one hired and the first one fired at the new company. Unless you have a phenomenal job offer, don’t switch jobs right now.
Although the job market looks buoyant right now, once Powell cranks up the interest rates, companies will cut costs, including layoffs. To be vigilant, get in touch with recruiters, seek out job leads from your network, go on informational interviews, update your LinkedIn profile and résumé and practice your elevator pitch and ways to answer tricky interview questions.
