Gusto’s Economic Data Roundup, January 2023: A Surprisingly Resilient Jobs Market
The BLS’ Employment Situation Report released on February 3rd painted a picture of a labor market that has not heard any of the recent conversations around a potential recession. The report estimated that the US added 517,000 jobs in January 2023, far above the 260,000 added in December. Similarly, January data from the 200,000+ small and medium-sized businesses on Gusto’s platform indicated that the jobs market remains incredibly strong, despite high-profile headlines of layoff among larger companies.
Hiring Ticks Up and Layoffs Remain Low
In a sign of the continued strength of the labor market, Gusto’s data indicates that small businesses were still eager to hire and slow to lay off workers in January. After four straight months of decline, hiring rates on Gusto’s platform picked up again, rising from 4.4% to 5.3%. Layoff rates, on the other hand, have not moved significantly: involuntary termination rates have hovered between 1.3% and 1.4% since June 2022.
Wage Growth Continues to Decelerate
Despite worries that this continued strength in the labor market may fuel inflation due to rising wages, we are seeing signs that wage growth is in fact decelerating among all major indicators. Today’s employment situation report estimated that average hourly earnings increased 4.4% over the past 12 months, below the 5.6% peak in March 2022. Similarly, wage growth among small and medium-sized businesses on Gusto’s platform has been decelerating recently as well: wage grew by 3.6% year-over-year in January, the lowest level of wage growth in 16 months. The expansion in employment coupled with slowing wage growth is a hopeful sign that potential workers have been coming back to the labor market, allowing companies to expand without competing as hard as they have needed to recently for available talent.
Industry Wage Growth
Although the crunch for labor has been softening overall, there are still pockets of competition in industries that have been most affected by the labor shortage. Looking at wage growth by industry in January, all of the top ten sub sectors with the fastest-growing wages were in Personal Services or Goods Producing/Logistics Sectors, topped by Tourism (+17.8% wage growth compared to last year), Mining and Oil (9.1%), and Food & Beverage (8.6%). In these sectors, businesses are still needing to work hard for talent as they seek to grow in order to meet continued consumer demand – and they are raising wages substantially to do so.