Tough Winter Times Ahead as Pace of Job Growth Is Cut in Half
Job growth underwhelmed and fell to its slowest pace since the recovery began in May; COVID-19 cases climbed, but the vaccine news was promising.
As anticipated, the arrival of the late-fall season also meant a slowdown in the pace of the recovery. Although the 245,000 jobs gained in November would be considered strong in normal times, in today’s environment it signals the pace of the recovery will likely moderate through early 2021.
With an anticipated increase in virus cases during the colder months, this type of slowdown was also expected. Growth had already been flattening for many industries outside of leisure and hospitality. Even that industry, which had started to recover jobs, faced obstacles, since business travel remained sidelined and restaurants in many parts of the country eliminated outdoor dining due to the changing climate.
Still, there is reason for optimism as we near the end of 2020. The news has shifted from the possibility of a vaccine to conversations around logistics and prioritization of who will receive it first. While there are still plenty of unknowns surrounding the multiple vaccines being prepared, reports of wide availability in the U.S. by summer 2021 line up well with the LaborIQ® by ThinkWhy forecast of an economic acceleration in the back half of next year.
The unemployment rate dropped slightly to 6.7% in November and many occupations, such as architecture and engineering, are already below 4.0% unemployment. The challenge is that the U.S. has millions of people in service occupations that cannot get back to work until social behaviors are able to return to normal. In November, food preparation and serving-related occupations had an unemployment rate of 15.0%, and tightening restrictions will substantially limit the ability for much improvement.
Looking to the future, the U.S. still has 9.8 million jobs to recover from their levels before the pandemic, and LaborIQ® by ThinkWhy projects that jobs will not be fully recouped until early 2023. The biggest storylines to watch through early 2021 are:
- Timing, efficacy, and number of people who will get a vaccine
- Impacts to industries and locations based on tightening social restrictions to contain the virus
- Stimulus to keep businesses and consumers afloat
(Survey Reference Week November 8-14)
Why It Matters
While we continue to see economic activity toward recovery, until a vaccine significantly lowers the virus’s impact, there will likely be some bumpy months of growth ahead. That theme holds whether for certain industries, geographies or for the whole nation. Still, the expectation of a strong rebound on the other side of COVID-19 is the baseline. Until then, look for certain industries to remain much stronger than others.
With a changing administration in Washington D.C., keep an eye out for the details of additional fiscal stimulus, as this will drive consumer spending. Recruitment for the following types of businesses will likely remain more robust than for others through early 2021:
- Finance and insurance
- Home delivery services
- Grocery stores
- Computer equipment
- Housing construction
- Scientific research and development
Talent acquisition professionals will have their hands full next year filling jobs, especially in hot hiring markets. LaborIQ reports the following locations are hot markets for hiring, after enjoying the nation’s highest job-growth rates in October:
- Virginia Beach, VA
- Raleigh, NC
- Los Angeles, CA
- Memphis, TN
- San Jose, CA
- Indianapolis, IN
- Dallas-Fort Worth, TX
- Birmingham, AL
- Austin, TX
- Charlotte, NC
Industry Movement & Recovery
(Survey Reference Week November 8-14)
The LaborIQ base forecast predicts the labor market to be back to pre-pandemic levels by the first half of 2023. Several industries are poised to recover faster, while a few others could lag the 2023 timeframe by up to two years. This projection is based on moderate job growth during this year’s fall and winter seasons, followed by stronger, more sustainable job growth beginning in mid-2021.
Recruiters and talent acquisition professionals should prepare for robust hiring next year at companies providing Professional and Business Services in big cities throughout the U.S. Among the cities:
- New York
- San Francisco
- Los Angeles
Economists at LaborIQ by ThinkWhy forecast that the Professional and Business Services industry should be primed for acceleration in 2021 as the promise of vaccines portends a stronger recovery on the horizon.
Other industries expected to return to pre-pandemic employment levels:
- Construction – Construction spending increased 1.3% from October, beating forecasts. According to the National Association of Homebuilders, suburban home construction in lower-cost markets has continued through the fall. Both building permits and housing starts grew in October, according to the most recent data. However, the National Association of Realtors reported Nov. 30 that the pending home sales index dropped for the second straight month as increasing prices, colder weather and growing concern in the surge of COVID cases impacted demand.
- Financial Activities – This industry continues to show resilience to the economic downturn, posting a near complete recovery overall with some sectors, such as Activities Related to Credit Intermediation and Insurance Carriers and Related Activities, at higher employment levels than before the pandemic. Overall, the industry posted an unemployment rate of 3.8% in November and demand is likely to continue.
- Healthcare – Some medical procedures could be docked in the near-term if more restrictions are enforced. However, pending vaccine approvals will also require companies to develop distribution strategies that include training healthcare workers to distribute the vaccine to the population. In some areas, hospital capacity is being tested and straining staffing. Unemployment rates for healthcare practitioners and technical occupations was just 1.9% in November.
- Professional and Business – Projected to be the strongest-performing sector by the end of 2022, with technology and other high-skill jobs already experiencing a very tight labor supply. That’s particularly so in Professional and Technical Services, which had an unemployment rate of 4.6% in November.
- Manufacturing – The ISM manufacturing index, which is a key economic indicator that measures order activity at U.S. factories, increased for the seventh consecutive month in November. Of the 18 different manufacturing industries, only Printing & Related Support Activities and Petroleum & Coal Products saw a contraction in November. Still, it will take some time to get back to former production levels due to both consumer demand and an impact on plants having to deal with COVID-19 outbreaks.
- Trade, Transportation and Utilities – There has been a major shuffle in this industry related to workers within transportation and material moving. Many have moved into the retail sector to help with home delivery services. The major concern is for travel-related transportation between now and the end of the pandemic.
- Government – The strain on state and local governments continues and the outlook suggests challenges will persist. Budget deficits will likely continue in coming years, given reduced income streams. According to the Commerce Department, government spending on services to the public fell at an annualized rate of 3.7% from Q2–Q3. The deficits require governments to reduce payrolls and services, which can balloon into other problems for local economies.
- Mining and Logging – Oil prices have rebounded since dropping below zero for a brief period in the spring. Getting travel restarted as the pandemic passes will be a key for this industry.
- Leisure and Hospitality – Airline companies have sought to avoid layoffs and furloughs but now have been forced to reckon with the possibility as demand has continued to wane. However, on Nov. 29, 1.2 million travelers passed through TSA checkpoints, the highest number since April. According to an article from HotelNewsNow.com, U.S. hotel occupancy hovered close to 50% from August through October, but it dipped to 41.2% for the week of Nov. 21, a sign that travel slowed as virus cases mounted. Restaurants are bracing for more potential restrictions in the near-term due to rising COVID-19 cases, but demand can return more quickly for them after the pandemic compared to businesses more dependent on travel.
LaborIQ by ThinkWhy continuously monitors and forecasts labor data at all levels, measuring impact to cities, industries, occupations and businesses across the U.S.