Where The US Labor Market Stands At Eight Months Into 2022
Olivia Attwood
Certified Professional Resume Writer ● Career Coach ● Executive Resume Writer ● MBA, BEng, CPRW, CPCC
The US labor market saw some historic changes within just the first six months of this year. Onlookers were astounded when a large number of job openings were created in a very short span in 2022.
We saw a big boom in employment this year due to the high demand for workers. Employers started offering higher wages before they were reined in by the rising inflation rates. Amidst all this, the shortage of workers to fill open positions remained where it was, commanding a sizable number of job seekers to watch the labor market from the sidelines.
Although the sudden strength of the US labor market is reassuring, we cannot expect the recovery to be over so soon. Data shows that the rates of Americans on the job hunt and of those in the workforce are almost as high as their pre-Covid numbers.
However, the hiring boom may slow down in the coming months. The Federal Reserve is inclined to keep raising interest rates for a few months to come. This will force businesses to face higher debt expenses, and some may even shut down their hiring process to stay afloat. Looking at the entire American economy, we cannot see any fast marches toward growth, but rather a slow crawl when compared to the situation in 2021.
Our outlook on the matter is not entirely bleak because we see multiple reasons to be happy about the current labor market. Businesses are creating more and more new jobs. And owners are offering bigger paychecks by the day. Looking at these changes, we believe there is reason to assume that our economy is starting to move forward on the correct path.
We observed a record-high of 153 million jobs in 2022 when the nonfarm payrolls exceeded their high back in February 2020. This indicates that the labor market is almost as healthy as it was back in pre-pandemic days.
During the first half of 2022, the number of payrolls was 500,000 less than that before the pandemic. But jobs were getting added almost twice as fast as the pre-pandemic pace in 2020. We can still expect more job gains as the US career market makes up for the jobs lost in the last two years.
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However, the unemployment rate was at a 3.6% rate during the first half of the year. It’s only 0.1% above the rate back in 2020 before the pandemic, but that small number too has an enormous impact on the working American. We can’t rely on this number too much because it only considers the workers who are currently working or are looking for jobs. The other demographics in the job market are not considered at all. This might be the reason we are seeing an all-time low unemployment rate.
Not only a large number of job openings but also the higher pay is benefitting Americans more than ever before. The average hourly earnings increased by 5.2% in the first six months of 2022. This number is 2 percentage points higher than the number back in 2020 pre-pandemic. Wage growth seems to be taking the scenic route to return to what it was before.
Although the high wages and monthly pay rises are good news, Americans won’t likely have much chance of enjoying them. Inflation rates are rising as never before, reducing people’s buying power at the moment. If we look at inflation-adjusted hourly earnings of workers, we can see that the real wage is lower than what it was before Covid hit us.
Hopefully, with the spike in real earnings seen in July, we can be on the lookout for better days. Owing to the lowered gas prices and the wage gains, Americans will be able to be comfortable with their inflation-adjusted incomes in a few months.
Even the labor shortage seems to be slowing down, although it is quite higher than what it was before the crisis. The job openings decreased from 11.3 million to 10.7 million in June according to the Job Openings and Labor Turnover Survey (JOLTS) report. This is the biggest drop seen since the beginning of the pandemic.
Many factors contributed to lowering the worker shortage levels. Many businesses have slowed down their hiring processes to adjust to the rising interest rates and slower growth. Also, the steady hiring rates we observed back in June 2022 contributed to filling up some of the openings addressing the shortage.