January 30, 2019 – The U.S. is looking toward its 100th straight month of job gains when the January Labor Report comes out on Friday. Many observers say that the pace of growth, with an average of more than 200,000 jobs created each month, is unsustainable. Some are even predicting a recession before 2020. But that is far from inevitable, according to a new report by ZipRecruiter, authored by labor economist Julia Pollack.
“On the contrary, the labor market improvements of the past eight years have set off a chain of events that should lead to an even stronger job market in 2019,” Ms. Pollack said. “And this snowball effect should be strong enough to overcome the headwinds of rising interest rates, stock market jitters, trade disputes and slowdowns in Europe and China.”
In 2018, businesses expanded hiring and posted record-high numbers of job openings across a wide range of industries. By the end of the year, there were over a million more job openings than unemployed job seekers. As a result, unemployment fell to the lowest rate in nearly 50 years — and the lowest rates ever recorded for blacks, Hispanics and people with less than a high school diploma.
“Many unemployed Americans were able to find jobs, and many underemployed or unhappily employed Americans were able to switch jobs and find new ones that paid more or suited them better,” Ms. Pollack said. “In fact, Americans voluntarily quit their jobs at the highest rates recorded since January 2001.”
To reduce turnover and recruit new talent, employers were forced to raise wages, improve benefits, offer their workers more flexible schedules and convert part-time positions to full-time positions. By late 2018, annual wage growth measured 3.2 percent, the fastest rate in a decade. Improved working conditions drew many people who weren’t in the labor force out of retirement or off welfare and back into paid employment.
Roller Coaster Market
“Despite the roller coaster in the market over the past few months, we saw a tremendous uptick in demand for talent in 2018 and all of our key indicators point toward that continuing in 2019 and even beyond,” said Mike Silverstein, managing partner of healthcare IT and life sciences at Direct Recruiters Inc. “The economy is continuing to experience a metamorphosis driven by technology and the desire to attack societal challenges using tools that have not previously existed.”
“As we look toward 2019 clients are still fairly optimistic,” said Chelsea Garrett, managing director of Garrett Search Partners. “However, in recent months, there is much more uncertainty about how a slowdown in China, Brexit and tariffs will dampen their 2019 forecasts. We’ve seen a tremendous uptick after the mid-term elections and hiring will continue in 2019, albeit at a slower pace. A downturn is inevitable, but for now, our clients believe we still have another one or two years before we see our next recession.”
ZipRecruiter’s new report offered five reasons why 2018’s labor market growth should lead to further success in 2019.
1. Bigger job markets lead to better matches
When more jobs are available, workers are better able to change jobs and optimize their labor decisions. “This benefits both individual workers and companies by causing jobs to go to the best-suited workers who are most productive in them,” said Ms. Pollack, who conducts job market research and provides insights to job seekers, employers and the ZipRecruiter leadership team. “Several studies have shown quite convincingly, both in the U.S. and abroad, that the productivity of workers is strongly correlated with the number of jobs in their local labor market. In other words, employment growth may lead to productivity growth that, in turn, fosters future economic growth.”
2. Better matches encourage more people to enter the job market
When more Americans obtain jobs, work experience and skills training, they are both better off today and more employable in the future. “This virtuous cycle extends to the community as well,” said Ms. Pollack. “Friends, neighbors and children tend to make themselves more employable when they see the increased benefits to investing time and money in developing their skills.”
Employers Look to Continue Hiring Plans
U.S. employers are expecting hiring to pick up in the fourth quarter, with 22 percent of employers planning to add staff, according to the latest “Employment Outlook Survey,” released today by ManpowerGroup. Employers in all U.S. regions and industry sectors are looking for headcount to grow.
As an example, the ZipRecruiter report said that expansions in pilot hiring and pay increases over the past few years have drawn more people to enter flight school. The number of pilot students jumped to 150,000 in 2017 and rose further in 2018, after remaining relatively stable at about 120,000 each year between 2010 and 2016.
3. Job growth in one sector fuels job growth in other sectors
Expanding employment in one sector also drives employment growth in other sectors. In a paper titled “Local Multipliers,” Enrico Moretti showed that whenever a local economy generates a new job, additional jobs are created, mainly through increased demand for local goods and services. “So places that saw increased employment in healthcare, professional and business services, mining, manufacturing and construction in 2018 will likely see increased demand for workers in education, healthcare, fitness, food, hospitality and entertainment in 2019,” said Ms. Pollack.
According to a recent ManpowerGroup hiring report, hiring intentions were slightly stronger in seven national industry sectors for 2019. Nondurable goods manufacturing sector employers nationally said they anticipate the strongest hiring pace in 14 years, while mining sector employers said they expect the strongest industry sector comparisons labor market in 10 years.
4. The labor market is not yet tapped out
Some observers suggest that employment gains eventually hit a natural limit. Surely unemployment cannot fall much lower than 3.7 percent, they say. “We know that it can, though, because unemployment is below three percent in many parts of the country, and just 2.1 percent for college graduates on average nationwide,” Ms. Pollack said. “2018 has shown us what is possible, but we are still far away from the upper limits to our success.”
Related: HR Challenges Expand in the New Year
The prime-age employment rate has risen steadily for the past nine years to 79.7 percent, but it has been higher in the U.S. in the past (80.3 percent in 2007 before the Great Recession, and 81.9 percent in 2000 before the downturn of 2001), and it is higher in many OECD countries today, said the ZipRecruiter report. Under the right conditions, it should continue rising.
Global Executive Trends for 2019
What will shape the C-level talent global workspace and work environment in 2019? The question has been answered by recruiters from executive search network IMSA Search Global Partners’ in the firm’s newly released “Report on Executive Trends 2019.”
The share of unemployed people who were unemployed long-term (27 weeks or more) has fallen by more than 200,000 over the past year. But it is still well above what it was in 1969, the last time unemployment was this low (one-fifth compared with only one-twentieth). Under the right conditions, it should continue falling.
5. The economic headwinds of late 2018 could subside
“What about those economic headwinds I mentioned earlier?” said Ms. Pollack. “We at ZipRecruiter see many indications that they may subside. The Federal Reserve has indicated that it may reduce the pace of interest rate increases in 2019 in light of low inflation. The U.S. and China could strike a wide-ranging trade agreement that would calm uncertainty.”
“Downturns in Europe and China, and high levels of corporate debt, are still sources of risk, but for now, default rates remain low and corporate earnings and profits — especially after-tax profits — remain very healthy,” Ms. Pollack said.
Related: 5 Job Market Trends Expected in 2019
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; Stephen Sawicki, Managing Editor; and Andrew W. Mitchell, Managing Editor – Hunt Scanlon Media