U.S. Labor Market Snapshot | August 2023

Executive Summary

• The U.S. labor market is showing signs of softening as job openings decreased from 9.6 to 9.5 million over May to June.
• There were 3.6 million more U.S. job openings than workers available, while labor market tightness measures such as job openings to job seekers remain elevated.
• U.S. wages grew at 4.4%, however workers still cite caregiving, sickness, & not wanting to work as the top three reasons for not participating in the labor force.
• U.S. employers will need to proceed with caution given the legal implications of AI as it pertains to the recruitment industry.

U.S. labor market is showing signs of gradual cooling

U.S. job openings decreased from 9.6 to 9.5 million over May to June, a decrease of 0.4% MoM & 12.6% YoY, indicative of a slightly cooling labor market, however other indicators such as labor market tightness remain elevated above pre-pandemic levels.

U.S. Employers could be more efficient in hiring

The job openings to job seekers ratio, which is one of the measures to assess the labor market tightness, continues to remain elevated at 1.6 compared to the pre-pandemic level of 1.2. The fill rate, which is the ratio of hires to job openings, was at 0.62 in June 2023 in comparison to 0.86 in February 2020. A fill rate greater than one indicates employer hiring efficiencies, while a fill rate less than one indicates it is harder for employers to fill vacancies.?

Although job postings on Indeed have declined by 5.5% over the past two years, job seekers seem to remain in an advantageous position given the negative correlation between fill rate and job openings to job seekers.

There are 3.6 million more U.S. job openings than workers available

What does this mean for Employers?

Despite the ongoing economic uncertainty, the work still needs to get done. Businesses are building their talent pipelines in anticipation of the upcoming fall and winter months that make up a considerable size of the retail, leisure & hospitality sales. U.S. businesses are continuing to anticipate labor shortages over the next 6 months according to the U.S. Census Bureau’s Business Trends & Outlook Survey across sectors such as accommodation & food services, finance & insurance, professional services, information, & manufacturing. ?

US separations increase MoM while quits decrease & layoffs increase

Total separations – the summation of quits, layoffs/discharges & other separations decreased by 4.3% from May to June, indicative of a cooling labor market. Firms remain cautious given the recent rate hikes by the U.S. Federal Reserve Bank which has made it a more risk averse environment for firms to invest in capital and people. Economic theory will predict that the unemployment rate will gradually increase, however it decreased from 3.6% to 3.5% over June to July.?

Voluntary Attrition

Quits represent voluntary attrition, whereby workers are consciously choosing to leave their employers. Arts, entertainment, & recreation experienced an increase in voluntary attrition MoM and YoY by 24.1% and 32.1% respectively.?

Involuntary Attrition

Layoffs & discharges represent involuntary attrition. Education & health services experienced an increase in involuntary attrition MoM and YoY by 13.9% & 15.4% respectively, while retail trade experienced a decrease of 18.1% MoM, however an increase of 81.0% YoY.

U.S. workers experience gains in wages?

Leisure & Hospitality experienced the largest gain in average hourly earnings and employment, while information experienced a loss of 0.9% in employment YoY. Compensation is still a relevant issue for many Americans given the ongoing cost of living challenges with respect to food, housing, and gas.

Gas Prices, Average Office Occupancy Rates, & U.S. Driving Behavior

The national gas average gas price last month was $3.52. There is a negative correlation between average office occupancy rates and gas prices for the 10 U.S. cities reported by Kastle Systems and Triple AAA. Office occupancy rates are higher for metros in Texas in comparison to metros in California given the difference in gas price averages. According to the most recent U.S. Household Pulse Survey, 35.7% of Americans were not impacted by the change in gas prices compared to the 26.7% of Americans who chose not to take a trip.?

What does this mean for Employers?

A portion of Americans might not be that price sensitive to a change in gas prices as substitution options such as public transit are not available in rural or less densely populated regions. As employers are asking employees to return back to the office, access to transportation will continue to be a challenge. The U.S. Census Household Pulse Survey cites lack of transportation as one of the top 5 reasons that prevent Americans from entering the labor force, after sickness, caregiving, not wanting to work, and being laid off or furloughed.?

AI & U.S. Workers

The Pew Research Center published a comprehensive report on which U.S. workers are more exposed to AI on their jobs last month. According to the findings, the following groups were more likely to be exposed to AI in their jobs:?

• Women
• Asian
• College-educated
• Higher paid workers

?Although AI tools like ChatGPT & Google Bard have useful applications in business functions such as recruiting, the likelihood of biased algorithms that are trained by biased data will be one of many challenges that firms will face as they incorporate AI into business functions involving people and job candidates. Examples of bias range from racial bias, whereby algorithms give preferences to white candidates in comparison to non-white candidates, or age bias whereby algorithms give preference to younger or prime age workers in comparison to older workers that are above the age of 55 years old.?

The U.S. Equal Employment Opportunity Commission (EEOC) published additional guidance this past May regarding the EEOC AI Fairness Initiative which ensures that the use of AI in employment decisions is fair and complies with U.S. federal civil right laws. The guidelines focus on transparency, accountability, and fairness. All U.S. employers should proceed with caution given the legal implications of AI as it pertains to the recruitment industry.?

Demand for labor remains high

Although job openings have declined MoM, employers are still struggling to identify talent. There seems to be a fixed labor supply which is essential to filling job vacancies. Labor demand which is defined as job openings plus the level of employed exceeds labor supply. Despite the basic principles of economics 101, labor market power is fluctuating between employers and employees.

Employers want employees to come back into the office as many believe visibility results in productivity and higher morale, however employees are still prioritizing their own utility and looking for flexible options with respect to work arrangements, pay, & life-work balance.