August 2022 Market Brief: The Labor Market is Breaking up with COVID, but Inflation Isn’t Breaking up with Anybody.
Welcome to Actalent’s Economy and Labor Market August 2022 Report where we share insights into some of the most important conversations happening in the economy and labor market and help connect the dots about why it matters.
Listen to the Brief:
The only people surprised about August's higher-than-expected inflation (8.3 percent) were economists. On the rise since November 2020, anyone who's buying groceries, visiting the doctor, in the market for a vehicle, or using electricity, probably wasn't surprised. On average, analysts estimate that households are spending about $460 more per month on the same list of groceries they bought last August when inflation was still high at 5.3 percent.
So much for transitory.
Another way to measure inflation's impact is through wages. Average hourly earnings grew 5.2 percent on the year in August. While this increase is high compared to the pre-pandemic 2.0 to 3.6 percent increases, inflation makes a 5.2 percent increase in wages feel like a nearly 3.0 percent loss.
The US Bureau of Labor Statistics (BLS) is officially breaking up with COVID and moving on to telework. Since May 2020, the fact-finding agency has included supplemental questions in its monthly survey of US households to gauge the impact of COVID on people's labor-related decisions—i.e., how much they're working due to COVID, or whether they're working at all.
BLS announced that September will be the last month they inquire about COVID impacts. Instead, they'll shift their focus toward a different trend in the labor market: telework. Beginning in October, BLS will begin to measure whether people work from home and if so, how much. Insight into this fundamental change to the world of work will also help economists understand how telework affects different demographics and occupations.
An Uptick in Unemployment Could Be…Good News?
Let's hope so. Overall, the economy added 315,000 jobs in August—a number the Feds consider 'just right' as they walk the very narrow line between lowering inflation and staving off a recession.
The unemployment rate increased to 3.7 percent in August from a low in July of 3.5 percent, though some economists are quick to point out the increase is likely paired with a hopeful one: the number of Americans rejoining the workforce. Also known as labor force participation rate, millions of workers tapped out from the labor force with the onset of COVID. In August, however, several hundred thousand tapped back in. The theory is that many of those who re-joined in August didn't find employment right away. If this pairing checks out, we should expect to see unemployment rates stabilize in the coming months.
Trends Impacting Hiring in Engineering and Sciences
For a complete list of hiring trends in Engineering and Sciences, download our full report.
- Utilities. Growth in renewables continues in the Utilities sector. Among last month's announcements are EDPR's power purchase agreement (PPA) for its Californian solarproject and rPlus Energies' completion of its first solar plant in Utah, which will provide energy to a nearby Meta data center. Last month, jobs in softwaredevelopment, program/project management, and electrical engineering were the top three in-demand Utilities roles.
- Construction. Workforce shortages are hitting construction companies hard: a recent AGC survey found that 93 percent of firms have open positions and 91 percent are struggling to fillthem. Recent legislation approving funding for our nation's infrastructure and chip manufacturing will soon open the floodgates for labor demand, putting further strain on these existing shortages.
- Consumer + Industrial Products. Manufacturing indexes indicated overall sector expansion in August. While demand grew in the form of new orders and backlogs, so did employment; in fact,employment expanded for the first time in three months. Durable Goods alone added 19,000 jobs. Those hiring gains make September's production outlook more optimistic.
Connecting the Dots Between Labor Market Trends + Real World Impact
- In a recent survey by PwC, 52 percent of executives rank talent acquisition and retention second on their list of worries, right behind cybersecurity. And rightfully so. Even as the economy slows, competition for skilled labor remains tight. Businesses are faced with the challenge of attracting and retaining specialized talent while also managing the cost of doing so in an inflationary market.
- If employees aren't actually quitting, they might be quiet quitting. Gallup's latest survey data gives insight into just how many employees are feeling disengaged from their work and doing the bare minimum required to collect their paycheck. For deeper insight into the causes and cures of disengagement, read Actalent's latest white paper, Lighting the Fire Within.
- Speaking of quitting, new data shows how just much it's paying off. As of July, employees who switch employers netted an annual raise of about 8.5 percent, up from 7.9 percent in June, the largest median pay increase for job quitters in two decades.
- Apart from higher pay opportunities, another top reason employees quit? Lack of flexibility in their schedule. And, according to PwC's aforementioned survey, leaders appear to get the message. Nearly 70 percent of C-suite executives plan to make remote/hybrid work permanent but identify the balance of remote, hybrid, and in-person as another challenge they're tackling.
Actalent's August 2022 Economy and Labor Market Report synthesizes information from a variety of sources including the United States Bureau of Labor Statistics survey results, Lightcast (formerly Emsi-Burning Glass), media reports, industry intelligence, company earnings reports, and external labor market data. The full set of data is included as a companion to this article.
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