A Data-Driven Breakdown of the Labor Market

To investors,

The Federal Reserve has been hiking interest rates aggressively for the last year and a half. Although multiple banks have failed and asset prices are down materially, the Fed has remained steadfast in their pursuit of tighter financial conditions.

A key reason the Fed has not wavered is the labor market. We currently have an unemployment rate of 3.7%, which is low compared to the historical averages. The unemployment rate in the United States averaged 5.72% from 1948 until 2023, reaching a high of 14.70% in April 2020 and a record low of 2.50% in May 1953.

South Dakota has the lowest unemployment rate at 1.9% and Nevada has the highest unemployment rate at 5.4%.

According to the Bureau of Labor Statistics, there are 10.1 million open jobs in America and 6.1 million unemployed people, which means there is ~ 1.66 open jobs for each person looking for work. Although unemployment is low, there are still enough open jobs to employ every person who wants a job in America.

Another important data point to evaluate the health of the labor market is the average hourly earnings for all employees on private nonfarm payrolls. The average is $33.44 today, which is significantly higher than the $7.25 federal minimum wage. Given that this is an average, the outliers in the data obviously skew the metric higher.

Industry Trends

If we dig deeper into the labor market, we can evaluate which industries are adding or losing jobs. One of the most surprising data points is that no industry saw a net loss in jobs in the past 12 months. The industry that saw the lowest growth is “Utilities,” which saw a net gain of 3,400 jobs (0.6%). The industry employs a total of 555,900 people.

In the past 12 months, the “Private education and health services” industry gained the most new net jobs. The industry now employs a total of 25,254,000 people, a gain of 1,073,000 (4.4%) in the past 12 months. 

Another point to call out here is the resurgence of leisure and hospitality. This sector got decimated during the pandemic, but it has recovered nicely. There was an addition of just below 900,000 jobs in the last 12 months and more than 16.5 million people work in the sector currently.

Remote Work

According to Forbes’ recent study, 12.7% of full-time employees work from home in 2023 and 28.2% of employees have adapted to a hybrid work model. The same report shows that approximately 16% of companies are fully remote, which means they are operating without any physical office.

Tech Layoffs

If we drill into the tech layoffs, we can get a good sense for how certain industries are navigating the economic pain.

Each layoff tracker has different data. They each agree directionally though. According to Layoffs.fyi, 785 tech companies have laid off 206,136 employees so far in 2023, which has already surpassed 2022’s 164,709 layoffs.

There were more than 100,000 individual tech employees that were laid off in January of this year, according to TrueUp. We have seen three other months in 2023 with at least 50,000 people laid off. The current month of June appears to be on track for the lowest number of tech employees laid off in almost 9 months.

It appears that the peak number of tech layoffs occurred in January, with 349 being reported that month, followed by a steady decline since. The month of June is not over so it is hard to predict if the trend will hold, but the significant decrease in recent months is encouraging.

We are not out of the woods yet. The slowdown in layoffs across the tech sector will be important to watch. If we enter a deeper recession, it would not be surprising to see more layoffs occur. The tech industry has been a big beneficiary of the loose monetary policy era of the last decade — what the Fed gives, the Fed can take away.

Overall, the labor market remains strong compared to historical trends. This strength is flashing a green light to the Fed to continue to keep financial conditions tight. It does not necessarily mean that the Fed will hike interest rates further, but we can’t discount that option either. We will find out more about the Fed’s plans later today — if they hike rates once more, then we have to believe that a recession is almost guaranteed.

After talking to hundreds of people looking for a new job in the last few months, one of our companies has been diligently working to place these individuals in new opportunities. Thankfully, we have helped thousands of people find a job in the last two years, so the experience is paying off at the moment.

We are hosting a free webinar on Monday June 19th at 6pm EST to teach people how to best position themselves to get a new job. We will focus on the bitcoin industry, but the lessons can be applied to any industry you are interested in. You can RSVP here.

RSVP For Job Webinar

Hope you all have a great day. I’ll talk to everyone tomorrow.

-Pomp

The US Economy Just Got Stronger

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