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Friday, August 19, 2022
The U.S. economy has created more than 3 million jobs this year.
The number of people working as of July exceeded the total seen in February 2020, just before the pandemic tipped the economy into recession.
And following this hiring binge, companies are now planning to cut back.
A new survey from consultancy PwC released this month showed 50% of companies are planning to reduce overall headcount. Additionally, 46% of companies said they are dropping or reducing signing bonuses, while 44% are rescinding offers.
Reducing overall headcount doesn’t mean all of the respondents to PwC’s survey are planning layoffs, but at least indicates plans similar to what we’ve seen in the tech industry, where backfills are paused, or previously allocated heads are cut from a department’s budget.
As the report says: “Respondents are also taking proactive steps to streamline the workforce and establish the appropriate mix of worker skills for the future. This comes as no surprise. After a frenzy of hiring and a tight labor market over the past few years, executives see the distinction between having people and having people with the right skills.”
And what a frenzy it has been.
Since the labor market bottomed in April 2020, more than 22 million jobs have been added — or in many cases, added back — to the U.S. economy. At 3.5%, the current unemployment rate also matches pre-pandemic lows.
As Federal Reserve Chair Jerome Powell said to reporters last month, the U.S. labor market is “very hot.” And those comments came before the July jobs report that showed 528,000 jobs were created last month.
This recovery, however, has been far from evenly spread across industries.
As highlighted by Marc Goldwein at the Committee for a Responsible Federal Budget earlier this month, overall leisure & hospitality employment is still down over 1 million jobs from February 2020.
Meanwhile industries like “professional & business services” — which covers a whole host of white collar, Zoom-based, hybrid remote-type jobs — are up almost a million jobs (986,000 jobs, to be exact) from pre-pandemic levels.
This uneven industry-level recovery is why it sometimes feels like “everyone” has gotten a new job in the last year while no restaurant, it seems, is fully staffed these days.
In exchange for a robust and rapid labor recovery, it seems many corporate leaders have been left dissatisfied with resulting changes in their workforce.
Last month, Powell said as the Fed raises rates to tamp down inflation, there will likely be “some softening in labor market conditions.”
It appears managers are hearing the message.