There was great anticipation ahead of the July jobs report. For months, economists, Wall Street analysts and politicians debated whether or not the United States was headed for a recession and what that would mean for Americans.
In Friday’s report from the U.S. Bureau of Labor Statistics, both sides of the aisle were surprised at the creation of 528,000 new jobs, more than double the 250,000 expected. The unemployment rate fell to 3.5%, returning to its lowest pre-Covid level in 50 years.
The good news was felt as much-needed relief for families to feel more confident about the economic recovery in the United States.
Employment growth was strong in almost all sectors
Payrolls have skyrocketed by 22 million over the past 27 months. The U.S. private sector saw growth with 629,000 jobs above its pre-pandemic peak in February 2020. This means the labor market has recovered all of the jobs lost during the pandemic.
Employment gains were widespread. The July report showed that leisure and hospitality employers are hiring quickly, along with restaurants and bars. There have been payroll increases in health, professional and business services, which include many white-collar jobs.
There are worrying issues in the jobs report
Unfortunately, if you dig deeper, all is not well. Full-time white-collar jobs fell by 71,000 during the month, while voluntary and involuntary part-time workers increased by 384,000.
The largest contributors to job growth have been front-line and part-time workers. Many of these people preferred full-time roles; however, they were unable to secure these positions. People have also been pushed into part-time jobs because their hours have been cut.
About 92,000 more Americans are working multiple jobs, 279,000 fewer self-employed, and there are 623,000 fewer people in the labor force compared to February 2020, as the labor force participation rate fell.
The participation rate is a measure used to determine the percentage of Americans working or seeking new employment. The formula calculates the rate by taking the number of people aged 16 and over who are in paid employment or actively seeking work, then dividing it by the total working-age population.
The withdrawal from the labor force is attributed to the retirement of baby boomers, the drop in net immigration and concerns over Covid-19. All of these factors have contributed to approximately 2-4 million Americans remaining out of the market, which has lowered turnout.
According to Layoffs.fyi, 65,962 employees have been laid off in the tech startup space. LinkedIn reported that dozens of leading companies across multiple industries have made layoffs.
The labor market is moving towards part-time work
It seems that the United States is moving towards a different type of labor market. More Americans are working part-time jobs, participating in the gig economy, and having to work two or more jobs to keep up with inflation.
This trend could foreshadow future problems as much of the population is unable to earn enough money to take care of their families as the costs of food, gas and rent skyrocket due to the galloping inflation.
The wage-price spiral
The July numbers are big enough to heighten concerns about a wage-price spiral. If this trend continues, it could be ruinous for the economy. Here’s what’s happening: Workers are asking for more money because of inflationary costs. In response, companies must raise prices to compensate for wage increases.
As costs soar, workers are noticing that their paycheck isn’t going as far anymore because the costs of goods and services have accelerated. Once again workers are demanding pay rises to keep up with the runaway rate of inflation. This could lead to a vicious upward spiral.
Good news is bad news
The irony of a hot labor market is that Fed Chairman Jerome Powell sees it as fanning the flames of inflation. Since his mandate is to reduce inflation, Powell must significantly cool the economy. This will be done by raising interest rates. The expected consequence is that companies will have to cut costs, which includes layoffs and hiring freezes.
The good news is that there seems to be an almost insatiable need for talent from businesses at all levels. This bodes well for job seekers. There should be plenty of jobs available until Powell aggressively raises interest rates. While inflation remains stubbornly high, it will continue to impact low-wage workers who will involuntarily have to take two or more part-time jobs to stay afloat.
What you need to do now
Heed author Malcolm Gladwell’s advice and go to the office five days a week. It doesn’t have to be forever. While things are up in the air, you want to be seen and heard by managers and essential staff. Proximity bias can save you when there is a call to cut jobs. One person who is always there will likely stand out from dozens of little faces in a box on a weekly video call.
To protect yourself from fire, strive to be indispensable. Make fun of the boss and key decision makers so they don’t want you on the redundancy list. Become the go-to person everyone relies on to get things done.
If you currently have a job, hang in there. You don’t want to be the last hired and the first fired in the new company. Unless you have a phenomenal job offer, don’t change jobs just yet.
Although the job market looks buoyant right now, once Powell raises interest rates, businesses will cut costs, including layoffs. To be vigilant, connect with recruiters, research job leads in your network, do informational interviews, update your LinkedIn profile and resume, and practice your elevator pitch and how to respond to tricky interview questions.