Welcome to the November installment of The Economy Explained, with Gusto!

The job of the Gustonomics team is to make you smart about the economy to your clients, who we know are asking you questions about what they should do. In this video, you’ll get a sense of what is happening in the economy, what that means for businesses, and what to keep an eye on in the coming months. You can also download the The Economy Explained one-pager to share.

Key Trends

  • Labor markets are loosening (a little). Labor tightness improved over the last few months, with 1.6 jobs per unemployed person, down 6% from our last release. That’s still a pretty tight talent market, and companies are responding by holding onto talent, and managing labor costs by delaying backfills when workers leave. However, candidate expectations are improving regarding pay and other compensation, with new hire pay and quit rates declining slowly. 
  • Financing continues to get more expensive. Banks continued to lower the amount of credit provided, and increase the requirements for loans and credit. Businesses that need short or long-term financing are going to face higher costs unless they are exceptionally well-qualified. However, demand has plummeted for business loans since early this year, and that will be a headwind for growth into 2024. 
  • Consumers are price-conscious, but still spending. Consumers continue to drive the economy, with resilient spending despite continued inflation and a smaller savings pool. Though they have plenty of savings built up still, anecdotal reports indicate they are becoming more sensitive to prices. 

So, what does that mean for businesses in the coming months? Our advice:

  1. Hold onto workers, but delay hiring new ones. Many companies are still at replacement hiring now, not expansion hiring. We have seen reports of companies reducing or eliminating signing bonuses, and Gusto’s New Hire Pay Index also shows continued slowdowns in candidate expectations for compensation. However, the talent market is still tight, with 1.6 job openings for every unemployed worker, and that means businesses should keep listening to workers and invest in building engagement for current staff.  
  2. Get balance sheets in shape. Maximizing cash flow positivity is going to be key to help businesses avoid going to capital markets for financing, as well as building up retained earnings to act as a cushion against unexpected expenses or cash-negative periods. 
  3. Meet consumers where they are. This advice remains unchanged from the last installment. Focus on mid-level pricing, extras, or discounts to deliver more value without resorting to steep cuts or reductions in prices. Consumers have been remarkably resilient through the last six months, and we believe they will continue to rely on the good labor market and their savings to smooth their spending. 

In closing, as always, we advise folks to think of the economy like the weather. What the forecast means for you and your business, or your clients’ business, depends on a lot of specific factors. Do you need to go outside while it’s raining? Does your roof have a leak? Do you sell umbrellas? 

Gusto partners can access additional one-pagers in Gusto Pro for 18 industries and 32 metro areas, and find company-specific data using People Analytics to tell the full people story for their clients. 

Thanks and see you all next time! 

Liz Wilke is a Principal Economist at Gusto, researching the state of work and business in the modern economy. She is a veteran of both the technology and government sectors, where she directed research programs and public spending that supports dynamic, resilient companies and workers across the globe. Liz currently lives in Washington, D.C.

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