Job Market on Fire as Workers Reshuffle

The labor market stomped on Omicron. Although the variant was expected to extract a toll on the January employment situation, the?report?was much stronger than expected. The economy added 467,000 new jobs and the unemployment rate edged up slightly to 4 percent, as the labor force participation increased to 62.2 percent, the highest level since March 2020.

The January number also had revisions to 2021 reports. These so-called “benchmark revisions” indicate that while job growth wasn’t quite as strong during the summer (June and July saw downward revisions of 807,000), it came roaring back by the end of the year (November and December were revised higher by a total of 709,000). Overall, there were an additional 217,000 jobs added for the year, putting average monthly job creation at 555,000 in 2021.

The BLS revisions to population estimates were also positive, with both household employment and the labor force now estimated to be about 1.5 million higher than previously thought. According to Andrew Hunter of Capital Economics, that means that “the labor force is not far below its pre-pandemic level after all. All that time wasted discussing whether workers would return when, in reality, it was just a statistical illusion.”

Meanwhile wage growth remains strong, with average hourly earnings jumping by 5.7 percent annually, an indication that the labor market is tight. We saw further evidence of the market’s strength in the recent Job Openings and Labor Turnover Survey (JOLTS) report for December, which showed that a near-record 4.3 million workers left their jobs voluntarily and job openings numbered 10.9 million. Did most tell their bosses to take their jobs and shove it? Sure, but that does not mean that they are never going to work again. LinkedIn Principal Economist,?Guy Berger??contends that workers are switching jobs, not eating bonbons on their couches, which means that the Great Resignation is more of a?Great Reshuffle.

Employees at all earnings levels have been seeking higher pay, flexibility, and work-life balance. As postings became plentiful and labor shortages pinched various industries of the economy, many Americans have realized that they can seek better opportunities if their needs aren’t satisfied.?Data?indicate that those who leave their jobs can earn more elsewhere than by staying put. Knowing that there are ample jobs for higher pay may help explain why so many people are able to quit freely. “It is not a coincidence that hires, quits and wage growth are extremely elevated right now,” explained Berger, “this is all part of the Great Reshuffle.”

Additionally, the pre-COVID trend of Baby Boomer retirement has added to the Great Reshuffle. The Federal Reserve Bank of St. Louis?found?that “there were slightly over 2.4 million excess retirements due to COVID-19” by August 2021, but Berger contends that it’s not yet clear whether older workers who left amid COVID are done for good, or whether they might rejoin the labor force.?Research?from the Center for Retirement Research at Boston College suggests that there has been “only a small increase” in workers claiming Social Security retirement benefits, so many older workers could find their way back to work as COVID retreats.

According to Berger, we are still in the early stages of understanding the Great Reshuffle and its lasting impact, so it would behoove us to be open to the story changing over the next months and even years.