LaborIQ author and economist, Mallory Vachon, Ph.D., reviewed the most recent labor statistics as of January 6, 2023. The economy exceeded economists’ expectations by adding a solid 223,000 jobs in December. The labor market continues to add jobs at a very robust pace. The 223,000 jobs added by employers in December suggest the labor market may have started to cool but remains resilient. Companies are backfilling roles as employees leave for other opportunities, but many businesses seem to be adding new positions as well.
Job openings are a key indicator of labor demand. And November’s job openings, reported earlier this week, showed no signs of companies letting up on hiring plans. Job openings held steady at 10.5 million, down from 11.9 million in March, but still much higher than the 2015 to 2019 average of 6.4 million monthly job openings. While most major industries had fewer job openings in November than in October, companies in Professional and Business Services – the largest industry by total employment – had more than 200,000 additional open jobs over the same period.
As demand for workers starts to moderate, we’d expect record wage growth to ease. December’s jobs report shows 12-month wage growth decreased to 4.6%, a welcome sign that the Fed may slow the pace of interest rate increases. Wage growth has been slowing gradually since March, when the Fed began raising rates, and our expectation is that this moderation in wage growth continue through early 2023.
Projections show 2023 looking like a more “normal” year with the potential for a deeper slowdown. LaborIQ® forecast scenarios for 2023 range from around 600,000 total jobs lost to 1.2 million net job gains. And after hovering near 5% since 2022, LaborIQ® forecasts wage growth to moderate substantially in 2023, with annual growth below 2.5%.
Companies will need to watch the labor market and track compensation trends closely to be competitive this year.