October Industry Performance & Recovery Outlook: Financial Activities Recovers, Leisure & Hospitality Adds Most Jobs

November 5, 2021

October industry performance is caught between opposing forces — a strong demand for goods and services has been muted by rising costs, supply-chain clogs and labor shortages. Industry recovery and growth remains uneven. Most noticeably, Financial Activities employment returned to pre-pandemic levels after adding 21,000 jobs in October. Leisure & Hospitality added 164,000 jobs, as demand for services has improved. In contrast, Government saw another drop of 73,000 jobs after losing 53,000 in September.


The good news is that COVID-19 cases — after slowing job growth in August and September — are now declining as the holiday season approaches, providing a potential boost to consumer spending and travel. Consumer confidence increased slightly in October — likely the result of falling COVID-19 cases and an improving labor market, despite widely-reported supply-chain issues and rising prices.

Still, seasonal demand will add to supply-chain congestion and companies will have to cover higher labor, material and fuel costs. Businesses’ ability and willingness to absorb extra costs or allow time for these market forces to neutralize will determine the nature of the labor market recovery.

There is some upside for leisure and hospitality, as international travel resumes and the holiday season approaches. Trade, transportation and utilities could capitalize on seasonal workers becoming more permanent additions to payrolls — alleviating labor shortages there, even temporarily. The trade-off is that industries such as construction are competing for workers as wages increase as demand continues. Manufacturing continued to see unprecedented demand along with supply constraints, while healthcare is facing continued employee burnout.
These trends — coupled with the expectation that quits will remain at high levels as wages, skills and talent are reallocated across the labor market — keep pressure on talent acquisition professionals to replace vacated roles and fill newly open positions.

LaborIQ® examines economic and labor-market factors — including the effects of COVID-19, market fundamentals, preexisting trends and consumer demands — to project when industries will reach pre-pandemic employment levels. Many industries are projected to recover in 2022, while others — including Leisure & Hospitality, and Mining and Logging — are not projected to recover until 2025 or later. Financial Activities returned to pre-pandemic in October as ThinkWhy economists had forecasted for 2021.


2021 Recovery

Financial Activities | The industry became the first to recover all jobs lost, in part due to lower job losses at the beginning of the pandemic. Consumers have made big purchases throughout the pandemic — including homes and cars — contributing to the industry’s relative strength. But supply-chain issues and labor shortages may continue, creating some uncertainty around consumer spending.

Despite faring well through economic conditions resulting from the pandemic, businesses in financial activities — who typically serve as financial intermediaries or sources of credit for consumers — will likely progress more slowly toward recovery because there are simply fewer jobs to recover as well as economic uncertainty. Interest rates have been near zero since April 2020, creating slim margins for financial institutions.

Overall, despite some challenges, the financial industry has fared better than most, and full jobs recovery is still possible in 2021 if, through the end of the year, the industry adds nearly 9,000 per month — equaling monthly job growth for 2021. Job growth lower than 9,000 per month would push recovery to 2022.

2022 Recovery

Construction | In September, construction spending fell for the first time since February 2021 indicating that rising material costs and shortages — along with labor shortages — are inhibiting growth. Commercial construction faces a host of challenges — remote work has reduced demand for office space, slowdowns in travel activity have limited hotel construction and ecommerce trends have shifted commercial retail demand to warehousing. To complicate matters more, wages for roles in leisure and hospitality, and transportation and warehousing, have grown faster and could be pulling away workers from construction jobs.

Healthcare | Technology, burnout and vaccination requirements are labor disruptors that will continue to impact this industry. In the long term, technology investments could boost the productivity of the workforce. But hiring managers and recruiters continue to face fierce competition to fill roles now in a field with a marginal availability, as these occupations have historically low unemployment rates.

Professional & Business Services | Retirements by baby boomers, remote-work flexibility, childcare, burnout and salary expectations are contributing to the pandemic-induced resignation and turnover that presents a challenge to employers. While labor turnover is considered normal, the current conditions have exacerbated the pressure on internal and external talent acquisition. Quits and turnover are likely to remain high, so a significant part of hiring activity will be job replacement instead growing payrolls which would help the industry recover.

Trade, Transportation & Utilities | The unprecedented increases in wages and the costs of other goods and inputs continue to limit businesses’ ability to meet demand. The Institute for Supply Management® (ISM) Report on Business® shows supplier deliveries and supply-chain issues continued to hamper growth in October. Holiday demand will likely only add to the congestion, increasing the time it will take for goods to move through system. The good news is that employment gains have remained strong over the past several months and robust demand and competitive wages may lure workers into seasonal roles that could become more permanent.


2023 Recovery

Manufacturing | Despite strong demand, businesses are not operating at capacity due to labor shortages and material constraints, resulting from supply-chain issues. However, this industry will likely continue to see steady employment recovery as businesses work through the backlog. The ISM® Report on Business® Manufacturing (PMI®) indicated another month of growth in October. While new orders dropped likely due to price levels, the PMI recorded its 17th consecutive month of growth.

2024 Recovery

Information | This industry covers a wide variety of businesses that have been uniquely impacted by the pandemic — ranging from data-hosting and warehousing services to media-production studios and software publishers used by customers for daily tasks. While the extreme disruptions resulting from the early stages of the pandemic may have subsided, the structural changes — related to consumer demand for entertainment and business IT needs for remote work — present challenges and opportunities for workers and organizations in this space.

2025+ Recovery

Leisure and Hospitality | The hardest hit industry of the pandemic — which includes hotels, restaurants and bars — only slightly ticked upward in October. The industry is not immune to inflationary pressures. Wages in this industry have seen significant growth to draw workers back to payrolls. Travel restrictions put in place in November 2020 will be lifted Nov. 8, 2021, permitting vaccinated people from other countries to travel to the U.S. This is a significant change of course that could boost demand for lodging, especially in large international markets such as New York, San Francisco and Los Angeles.

Mining and Logging | Employment in this industry has some tail wind fueling growth as strong global energy demand is driving up costs. U.S. rig count continues to rise and demand is expected to remain elevated over the next few months, particularly driven by cooler tempers. But supply isn’t expected to shift significantly, causing prices to remain elevated. Crude oil inventories also increased less than expected according to the EIA data released Nov. 3, as strong demand outpaces fuel availability.

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

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