Is the Labor Market Starting to Cool? 263K Jobs Added in September
Right in line with economists' expectations, the U.S. economy added a solid 263,000 jobs in September.
September’s net job gains are still well-above the pre-pandemic average, where 200,000 jobs added would be a strong number. With unemployment rates at pre-pandemic lows and nearly two job openings for every unemployed person, U.S. businesses need to focus on retaining talent.
September’s more modest job gains are a sign that the labor market may be starting to cool from record highs. This month’s job gains bring the total for 2022 to nearly 3.8 million, an average of 420,000 jobs added per month – double the pre-pandemic average job gains. Numbers for July and August were revised upward by a total of 11,000.
Despite more moderate job gains in September and expectations of a slowdown or recession, hiring remains strong compared to historic levels. The labor market remains tight, and, while showing signs of softening somewhat, the competition for talent is still fierce. As demand for workers starts to moderate, we’d expect record wage growth to ease. September’s jobs report shows 12-month wage growth hitting 5%. Wage growth remains elevated from a historic perspective, but this is the lowest level since December 2021, signaling some relief for employers looking for talent in today’s market.
Job openings – a key indicator of labor demand – hires, quits and layoffs are reported on a lag. And August’s job openings released earlier this week, showed that job openings declined by over 1 million to 10.1 million, still more than 40% above February 2020.
And while there have been some high-profile layoffs, especially in the technology space, layoffs only ticked up slightly month-over-month and remain near historic lows at 1.5 million per month, compared to around 1.9 million monthly layoffs before the pandemic. However, in September the unemployment rate ticked down to 3.5% – matching the pre-pandemic low – due to a 261,000 decrease in the number of unemployed people.
When workers do lose their jobs, there’s been enough demand out there that they aren’t staying unemployed for long. With 10.1 million job openings but only 5.75 million unemployed workers available to fill those open roles, there are nearly two open jobs for each unemployed worker.
Despite Challenges, 2022 will Close out as an Historic Year for Hiring
While there are broader economic challenges and uncertainty abroad, hiring is likely to slow in the final quarter of the year, but 2022 will still close out one of the strongest years for hiring in history. That said, recent trends show hiring for 2023 looking like a more “normal” year with the potential for a deeper slowdown or recession.