Unemployment Rate Hits 53-Year Low
February 3, 2023 – Employment rose by 517,000 in January as the U.S. unemployment rate edged down to 3.4 percent, according to today’s U.S. Bureau of Labor Statistics report. The number of unemployed persons also decreased to 5.7 million in January. Job growth was widespread, led by gains in leisure and hospitality, professional and business services, and healthcare. Employment also increased in government, partially
reflecting the return of workers from a strike. Among the major worker groups, the unemployment rates for adult men (3.2 percent), adult women (3.1 percent), teenagers (10.3 percent), Whites (3.1 percent), Blacks (5.4 percent), Asians (2.8 percent), and Hispanics (4.5 percent) showed little change in January.
The number of persons jobless less than 5 weeks decreased to 1.9 million in January. The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.1 million. The long-term unemployed accounted for 19.4 percent of the total unemployed in January.
“Today’s jobs report is almost too good to be true,” wrote Julia Pollak, chief economist at ZipRecruiter. “Like $20 bills on the sidewalk and free lunches, falling inflation paired with falling unemployment is the stuff of economics fiction.”
“When you look at this, it’s pretty hard to shoot any holes in this report,” said Dan North, senior economist at Allianz Trade North America.
Where Job Growth Occurred
• Leisure and hospitality added 128,000 jobs in January compared with an average of 89,000 jobs per month in 2022. Over the month, food services and drinking places added 99,000 jobs, while employment continued to trend up in accommodation (+15,000). Employment in leisure and hospitality remains below its pre-pandemic February 2020 level by 495,000, or 2.9 percent.
• In January, employment in professional and business services rose by 82,000, led by gains in professional, scientific, and technical services (+41,000). Job growth in professional and business services averaged 63,000 per month in 2022.
• Government employment increased by 74,000 in January. Employment in state government education increased by 35,000, reflecting the return of university workers after a strike.
• Healthcare added 58,000 jobs in January. Job growth occurred in ambulatory healthcare services (+30,000), nursing and residential care facilities (+17,000), and hospitals (+11,000). In 2022, healthcare added an average of 47,000 jobs per month.
• Employment in retail trade rose by 30,000 in January, following little net growth in 2022 (an average of +7,000 per month). In January, job gains in general merchandise retailers (+16,000) and in furniture, home furnishings, electronics, and appliance retailers (+7,000) were partially offset by a decline in health and personal care retailers (-6,000).
• Construction added 25,000 jobs in January, reflecting an employment gain in specialty trade contractors (+22,000). Employment in the construction industry grew by an average of 22,000 per month in 2022.
• In January, transportation and warehousing added 23,000 jobs, the same as the industry’s average monthly gain in 2022. Over the month, employment in support activities for transportation increased by 7,000.
• Employment in social assistance increased by 21,000 in January, little different from the 2022 average gain of 19,000 per month.
• Manufacturing employment continued to trend up in January (+19,000). In 2022, manufacturing added an average of 33,000 jobs per month.
• Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; wholesale trade; information; financial activities; and other services.
Recruiting Veteran Weighs In
With a focus on helping PE & VC backed healthcare organizations, Tim Russell, managing partner of The Tolan Group oversees the business development and recruitment activities for private equity and venture capital clients. Using market demographic data, Mr. Russell consults clients on candidate dynamics, compensation arrangement and hiring probability. Using data driven analysis, Mr. Russell is able to provide real time intel as to what is needed for completing a search assignment expeditiously with candidate retention as a byproduct.
Mr. Russell recently sat down with Hunt Scanlon Media to share his views on the economy.
Tim, what are you anticipating for hiring in 2023?
I anticipate a robust year this year. As a team we project a 20 percent increase in search volume this year compared to last year. The sector we serve remains vigilant in hiring top tier talent to lead their organizations. Though certain dynamics are more prevalent today than in past years, the candidate market is open for business and highly sought executives are willing to listen to a recruiter who is representing a compelling opportunity. Over the last two years the role of CFO has been our most requested search. Of all our C-suite recruiting projects last year, 44 percent of C-suite recruitment was CFOs. Given the need and nuances of today’s CFO job responsibilities, I see this continuing to be our most popular search throughout 2023. Another area of high request is for VPs. Many executive search firms would rather not deal with these types of positions given the low profitability compared to C-suite recruitment fees. Our recruiting process has been very effective at this level and we expect to recruit more Vice Presidents this year than last.
Do you feel we are heading into a recession? Why yes or why no?
I hesitate to weigh in on such a volatile subject. Regrettably this subject, like so many others these days, has become a lightning rod issue and very politically divisive. In spite of that, I think we are already experiencing recession. Harkening back to my dreaded college econ class, recession was defined as consecutive quarters of declining GDP growth. If that’s still the definition…than recession hit late last year. If we’re redefining the definition [of recession] than perhaps we have yet to arrive at one. The proof of recession is in the math. Numbers don’t fib. To channel a previous political pundit slogan, “It’s the economy, stupid.” High prices and fewer spending can be a source of denial but they can’t be ignored. Things are costing more these days. If one doubts that…a quick stroll down the aisles in a grocery store will confirm that to be true. Recession effects all of us though maybe not equally. Constant news of interest rate hikes and a glance at a paystub in January 2023 compared to December 2022, reveals that something like a recession is ashore.
“One of the reasons I love the executive search business is because of the recession proof currents it possesses.”
What potential impacts will the search sector feel?
One of the reasons I love the executive search business is because of the recession proof currents it possesses. Arguably, as long as there are people, there will be a need for a recruiter. Potential impacts on the search sector will be felt by firms operating in certain industries. Not unlike during COVID when the hospitality, travel and entertainment industries were hobbled due to the shutdown, certain industries will feel a drawback during these times. The tech sector, though once white hot, is starting to cool in certain areas. Search firms who are tech oriented will see a decrease in permanent assignments but may see opportunity in the staffing realm. People who operate in the transportation sector might see a little bit of a slowdown. Recent conversations with PE investors who invest in the transportation sector have revealed a slowdown in freight for trucking companies. I’ve long felt like trucking companies were a barometer as to the health of the nation’s economy. If freight doesn’t move, that’s an indication that supply and demand might be out of sync and a sign of repressed spending as people wait out the economic waves of uncertainty. Other sectors might not see the same retraction if they recruit in the healthcare, Fintech or cybersecurity ecosystems. These industries remain very busy for executive recruiters.
Do you see continued consolidation within the sector, why are M&A deals attractive now?
The M&A activity being seen in the search sector seems to remain strong. The reasons for the M&A interest vary, but consolidating efforts of successful recruitment teams can create a strong bottom line and significant growth opportunities. Since so many search firms operate with a boutique/specialty focus, the joining of a few firms who operate in different verticals but share similar recruitment practices can be a winning combination to profitability. Few investments can be as “easily” scaled as a search firm. In many industries there are subcategories that have hiring needs. Take healthcare as an example. A firm that provides executive search services to hospitals, could benefit by joining forces with a clinical recruiter who recruits physicians. Other firms just recruit nurses. Still others only recruit allied professionals or pharmacists. To couple a few firms like that together and rebrand as one entity, will make significant profit increases inevitable. In the healthcare sector alone, expansion opportunities are immense. Such opportunities exist in other sectors as well. Search firms scratch the most basic itch of investors – scalability, duplication and repeat business opportunities. If managed properly, search firms are a viable investment as a platform or tuck-in and all signs point to remaining that way for the foreseeable future.
Related: Talent Shortages Reach Highest Levels in 16 Years
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media