LaborIQ® Index: Market Rankings for August 2021

September 3, 2021
|
Author: Jay Denton

U.S. job gains plummeted in August with just 235,000 jobs added. If gains continue at this type of pace, it puts the U.S. economy in serious jeopardy of not reaching a full recovery by late 2022 or early 2023. Millions of people have gotten back to work this summer, and businesses remain eager to capitalize on strong demand for their products and services, but August’s number was the most disappointing in months.

It's a known challenge for the labor market that disruption will be caused by the rapid increase of virus counts; it just wasn’t anticipated quite this early. This fall had the potential to be a blockbuster season for hiring, but the rise of the Covid-19 delta variant is threatening the near-term pace of job gains.

The pandemic's impact has been felt across the nation's major metros - detailed in here in the LaborIQ Index: August 2021 Market Rankings

national-outlook-mkt-performance-Aug2021

The good news is Summer 2021 was an incredible three-month stretch of job recovery. From June to August, approximately 2.3 million jobs were added back to the U.S. economy, a total normally considered strong for a full year of growth. The past two months of gains were revised upwards by a total of 134,00 jobs. Of the 22.4 million jobs lost during the initial impact of the pandemic, only 5.3 million remain unfilled.

It is still unknown how the Delta variant will impact the next few months, but odds are the pace of job gains will remain slower, even if just for logistical reasons. Schools are being impacted by the spike in children catching the virus; therefore, causing parents’ work schedules to be disrupted which ultimately affects business productivity.

It might seem small on the surface, but meetings get missed and emails and calls go unanswered for longer periods of time. Decision-making is a slower process, impeding progression of things like product purchases and interviewing and hiring new employees.

Industries that are once again starting to thrive will experience most of the impact from rising virus counts. Of the 2.3 million jobs added this summer, 36.0% were in leisure and hospitality, airlines and ground passenger transportation. More people entering isolation and quarantine periods will limit the demand those sectors would have otherwise received.

For industries less directly impacted by the ongoing virus, their greatest threat will be finding and hiring talent to enable growth.

The Talent Demand 

Every single business – from west coast to east coast – is struggling to find the talent they needed.

Where did the talent go? Close to 2.9 million people remain out of the labor force and millions more are looking for work, but have not found a match among the record 10.1 million jobs open in the U.S.

The end of two federal policies could play a role in getting people back into the job market. The eviction moratorium ended across the nation on August 26, stemming from a Supreme Court ruling, but local and state protections remain in place in some areas.

The additional federal unemployment benefits of $300 per week are set to expire September 6 in the remaining half of U.S. states that did not withdraw early from the program.

The conclusion of both policies could provide incentive for some people to seek and accept one of the millions of available jobs, but the obstacle getting people to work is proving to be more complicated. Policy terms will only give a slight push to people who are simply choosing not to work, but other challenges like a mismatch of skills, childcare, changing social behaviors and lingering fears of the virus play a role as well.

In the meantime, the transition of talent will continue, especially for high-demand roles. Tech jobs had an unemployment rate of 1.5% in August, just above the all-time low of 1.3% in July 2019. Healthcare practitioners, architects, legal and those in management roles have extremely tight unemployment rates, meaning talent acquisition professionals will have to poach them from other companies.

Jobs Recovery Outlook

The demand for hiring is robust, and the number of job openings has hit a record high each of the last four months, but August's results were disappointing. Employees are voluntarily leaving their jobs at a record pace, and several large cities are approaching their pre-pandemic employment levels – meaning the labor market remains in tight supply and the competition for skilled talent is fierce.

With that said, the pace of the monthly job gains will likely underwhelm during the fall and winter months, based on the most recent trend. The U.S. economy and labor market were in a different place a year ago, but it is worth noting that job gains slowed each month last fall until they eventually turned negative in December.

It would not be surprising to see a similar trend play out this year. Still, let us not overshadow the great strides the labor market has made this summer in recapturing jobs, putting many metros on the road to a full recovery by the middle-to-end of 2022.

For the U.S. to get back to its pre-pandemic employment level by December 2022, an average of 333,000 jobs would need to be added per month. Consider that a full recovery references (pre-pandemic) employment numbers during one of the tightest and strongest labor markets the nation had seen in half a century. The limited availability of labor will pose the greatest risks to recovery and will eventually slow the pace, Delta variant or not.

“Labor

LaborIQ® Index: August 2021 Market Rankings

Hiring surged during the early summer months, but the strength of the labor market has continued to vary significantly by metro area. It has been approximately a year-and-a-half since the pandemic began and 22.4 million jobs were lost in its wake. For the U.S. labor market, some metro areas are still feeling the pain much more than others.

Even with such a deep cut in jobs, nine of the 150 metros ranked in the LaborIQ Index have already exceeded their pre-pandemic employment levels, and another 13 are within 1.0%. While that is only one metric in the index equation, a strong, tight local job market can fuel other important indicators, such as net migration and wage growth.

Labor Market Indicators: Road to Recovery

The proprietary LaborIQ® Index identifies and tracks 10 key performance indicators that best measure and rank a local economy’s performance. These indicators or variables are present in every market and represent the greatest drivers of a market’s economic progress or decline, and now, the drivers that impact each metro’s progression toward pre-pandemic employment levels.

The ranking index provides a strong evaluation of which U.S. cities are attracting talent, recouping jobs and those primed for recruiting and hiring.

Music City is a Chart Topper

Nashville re-entered the top of the LaborIQ Index at number four, based on strong population growth which is fueling job creation. The Nashville area has been ranked in the top 10 for four consecutive months, as compared to number 46 a year ago.

LaborIQ Index: Top Five Metros Ranked in August 2021

  1. Dallas-Fort Worth-Arlington, TX
  2. Phoenix-Mesa-Scottsdale, AZ
  3. Austin-Round Rock, TX
  4. Nashville-Davidson-Murfreesboro-Franklin, TN
  5. Denver-Aurora-Lakewood, CO

Nashville re-entered the top of the LaborIQ Index at number four.

Out of 150 metros, the Nashville metro area ranks in the top 25 for:

  • Job gain,
  • Job growth,
  • Average hourly wage growth,
  • Net migration, and
  • Working-age population growth.

Most of the metro areas surrounding Nashville are also showing very strong performance and will be in the first wave to reach their previous employment numbers. This is important because of how much neighboring economies depend on each other.

Due to strong population movement to these areas, a substantial labor force has been maintained while other areas of the country simply have less available talent than before the pandemic.

Location Matters: Top & Bottom 20 Labor Markets

The LaborIQ Index paints a picture of how different and regionally focused performance and recovery looks – from both sides of the spectrum.

The entire Northeast, Midwest, and California are on the outside looking in when it comes to the strongest labor markets. The top 20 metros are primarily in the Southeast, Texas, and Mountain West areas the country.

Strong net migration has fueled the labor force and created demand for products and services. These metros have led the recapturing of lost jobs but even with rising populations, talent supply cannot keep up with demand, which in turn, is putting pressure on wage growth.


The 20 bottom-ranked metros have an even tighter regional footprint. The Northeast, eastern section of the Midwest, California and areas in-or-near Louisiana comprise 16 of the lowest 20 index rankings. Unfortunately, many of the metros in the Gulf Coast area - near New Orleans - are suffering through the aftermath of another devastating hurricane.

Recovery is expected to delay to 2024 or later for these metro areas. However, there is still upside for talent acquisition professionals as the number of jobs that will need to be refilled will be high, although keeping talent local will be a challenge.

Out of 150 metros, the average net migration ranking for these metros is 106 and population growth is 95. Of note, these locations are at major risk of losing talent to job markets with better opportunities, e.g. relocations. Out of these 20 metros, 15 are expected to have more people move out than move in during 2021, which is a drain on talent supply.



Industry Performance & Recovery Outlook

August industry performance is clouded by the resurgence of the Delta variant, as it is becoming a new economic indicator that must be closely watched, as well as the past two weeks of unemployment claims. Consumer demand and sentiment have slumped recently, and businesses continue to struggle to hire workers quickly enough.

national outlook job gains Aug2021

While there was some upside for industries that continue to gain workers like Professional and Business Services, Leisure and Hospitality has been slower to recover due to shifts in consumer confidence and spreading Delta variant.

Talent acquisition professionals continue to deal with pressures to fill vacant roles and must continue to manage employee expectations about returning to the office.

Below outlines the LaborIQ forecast of when major sectors are projected to reach pre-pandemic employment levels and details factors impacting the ongoing and uneven recovery across the nation.

2021 Recovery

Financial Activities: Consumer sentiment dropped in August, but demand for businesses that fund or facilitate significant purchases and transactions remains strong. Some industries such as credit card issuing have slowed in recent months but remain well above pre-pandemic employment, while businesses issuing other forms of credit, including real estate, have continued to expand beyond pre-pandemic employment levels. Rental and leasing businesses in this sector face various challenges depending on their client base. Truck and trailer leasing, for example, has benefited from a high volume of people moving while office equipment and machinery rentals have been stagnant. The Delta variant has delayed the need for these services as firms hold off on return-to-work plans.

2022 Recovery

Construction: Employment recovery has shifted to 2022 according to LaborIQ® forecasts. Non-residential construction employment stalled in the fourth quarter of 2020, remaining lower than pre-pandemic levels. However, residential construction carried the industry’s employment growth, driven by the boom in housing demand. Even if residential development doesn’t continue at the same pace, the backlog of projects will help maintain labor demand, but commercial demand won’t improve until companies have confidence that workers can safely return to the office.

Healthcare: The industry is experiencing yet another squeeze caused by the surge of virus cases, making not only hospital beds but medical staff hard to come by. In-person visits have given way to tele-visits in many cases, which is a trend that could be here to stay. It will create different job opportunities and investments in the space.

Professional and Business Services: There are 468,000 jobs to be recouped from the losses in 2020. At its worst, the employment base was down 11% in 2020. However, LaborIQ predicts this industry will be one of the strongest performing in 2022. Despite the generally favorable business conditions and remote flexibility, companies are still finding it difficult to place workers in skilled roles. Challenges include workers’ desires to remain remote and significant job openings that are enticing workers to leave current positions for higher wages. Whether filling recently vacated roles, or simply trying to broaden the candidate base, employers will have to be strategic when it comes to remote work models or relocating talent from other areas.

Trade, Transportation, and Utilities: Business investment in transportation equipment and consumer demand for transportation services have improved but remain lower than pre-pandemic levels. Retail sales posted underwhelming results in July. The Bureau of Transportation statistics indexes have posted improvement from 2020 but remain below 2019 figures. The industry is dealing with labor constraints and other logistical and economic factors that are limiting its growth potential.

2023 Recovery

Manufacturing: The ISM® Report on Business® PMI® edged upward again to 59.9, from 59.5% in July. Readings above 50% indicate industry expansion. Additionally, according to the same report, new orders ticked upward in August as demand remained strong and production output still must catch up with back orders caused by recent material shortages. Despite the demand, labor shortfalls remain an issue, so job gains will be a gradual climb to recovery.

2024 Recovery

Information: According to Pew Research, nearly 85% of U.S. adults own a smartphone – that’s just mobile. There are also desktops, tablets, work laptops and don’t forget the kids’ devices. The support and app innovations on these devices stem from this sector. Device volume and demand in the age of remote work is also a driving factor, as companies’ tech stacks grow to support teams spanning multiple locations and time zones.

2025+ Recovery

Leisure and Hospitality: This industry, inclusive of restaurants and bars, lost momentum in August. Consumer sentiment dropped in August as compared to the same period in 2020, according to the Survey of Consumers conducted by the University of Michigan. Dining reservations, reported by OpenTable also declined. The Delta variant has disrupted the return of in-person service-based businesses, even without widespread closures. Making matters worse is the staffing challenge for restaurants and other venues.

Mining and Logging: Operable capacity for refineries has remained strong since June. Crude oil inventories dropped more than expected according to the EIA suggesting higher demand for petroleum products, sparked by higher demand for travel. The Delta variant may hinder growth in the short term. Hurricane season, beginning with Hurricane Ida that just hit Louisiana, will also limit production but won’t show up immediately in reported data.

LaborIQ by ThinkWhy reports, forecasts and advises on employment conditions and the impact to jobs, industries and businesses across all U.S. cities.