After a summer of positive employment growth, the September JOBS report from the Bureau of Labor Statistics and data from Gusto’s Economic Trends Tracker both indicate a cooldown. Gusto data shows net hiring standing at less than half the rates seen in previous Septembers, while other indicators suggest further moderation in the labor market: the Quit Rate on Gusto’s platform registered it’s largest monthly drop in two years, and the Layoff Rate has ticked up from record lows. Wage growth has also moderated recently – although workers in hard-hit service-sector jobs continue to see annual wage gains of nearly 10%.
This slowdown will likely continue a shift in the labor market from workers towards employers. As the Federal Reserve focuses on cooling down the economy to tame inflation, business owners’ demand to hire workers will continue to ease, and employers will not need to work quite as hard to retain and attract talent – resulting in slower employment growth and wage growth.
- Employment growth continues, though slower than prior Septembers: On Gusto’s platform, net employment rose 0.5% in September 2022. That’s higher than the flat (0%) employment growth seen in August, but remains lower than the 1.3% gain in September 2021 and the 1.1% growth in September 2020. As seen in Figure 1, this pattern is consistent with trends seen in prior months suggesting that the economy continues to grow and continues to add jobs, but the pace of that growth has slowed down. Looking by sector, Warehousing saw the largest percentage-point gain compared to last year (4.8% higher). While most industries saw slower rates of growth than last year, personal services sectors such as Accommodations and Arts & Entertainment experienced smaller declines than professional services industries such as Consulting and Finance.
- Quits Tick Down, Layoffs Tick Up: Figure 2 displays the Quit Rate (red) and the Layoff Rate (blue) on Gusto’s platform. Despite fears that the economy is slowing down, the rate at which workers quit their jobs has remained elevated and the Layoff Rate remains near its post-pandemic lows. However, both series have shown initial signs of a return to more normal levels. In September, the Quit Rate fell from 5.2% to 4.3%, the single largest monthly drop in our series, going back to January 2020. The Layoff Rate has also increased from its post-pandemic low of 0.9% to 1.3% in September. As employment growth slows, these trends are a sign that workers are becoming slightly less confident in their ability to find new jobs.
- Wage growth has slowed from peak early in 2022: We do see some signs that the labor market is loosening just a bit, however. Average hourly earnings grew by 5.1%, down from the peak of 6% seen in May and the slowest rate of growth in 2022. Slowing earnings growth is an indicator that this tightness we are seeing in the labor market may be loosening a bit, with employers not quite needing to raise wages as fast to retain and attract workers. We are continuing to see the highest wage growth in service-sector industries impacted the most by the labor shortage: among the largest wage gains were in Accommodations (10.8%), Food & Beverage (8.3%), and Transportation (8.2%).
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