December 2022 Market Brief: The Labor Market Continues to Flex in a Complicated Economy

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"The economy remains complex and difficult to predict, but December data showed that companies are still hiring, and worker demand still exceeds supply." —Eliza Hetrick, Actalent’s Market Analyst

If there's one thing the world has learned to navigate, or maybe just expect, it's uncertainty.

As some economic indicators weaken, others, including the labor market, continue to flex leaving many unsure what to make of this strange economy. One year ago, we wrote about the tug-of-war, or whiplash effect, of the push-pull factors heading into 2022 and it seems we're gearing up for more of the same in 2023. This time, however, we're adding higher interest rates into the mix as the Federal Reserve aims to bring down inflation in an economy that accelerated quickly.

It's a complicated scenario. Recessions are often fueled by perceptions, which in turn, fuels actions. Perhaps the tug of war we're battling right now is the one occurring between experts: Some scream recession; others scream slow-cession. The rest of us scratch our heads. 

On one hand, the Federal Reserve's interest rate hikes are aimed at slowing the amount of money people are putting into the economy by increasing the supply of workers. They hope to accomplish this by increasing labor force participation (that is, enticing those who left the labor force to return) and/or increasing unemployment (that is, putting more people out of work). That's because when demand for workers is high, wage growth is high too. Put simply: increase the supply of workers, decrease the growth in wages. 

On the other hand, the economy added 223,000 jobs in December, which is certainly a slower pace than we've seen, but not a standstill. Unemployment also declined (3.5 percent), as did layoffs (1.35 million). Labor force participation saw only the slightest increase of .1 percent (currently 62.3 percent). And while inflation is up year-over-year at 6.5 percent, it's down .1 percent from November, which is a step closer toward the Federal Reserve's 2 percent inflation target, even as the labor market shows strength.

In other words, despite a slight increase in labor force participation and despite a decrease in unemployment, interest rates still came down slightly. But is it enough to slow down the Federal Reserve's interest rate hikes? Nobody's really sure.

So, what can we do when things feel uncertain? We can simplify. We can quiet the noise and assess on a very personal level what's working, what we're good at (our skills and capabilities), and where we can have the most impact. We'll determine what to subtract, what to continue, and what, if anything, we need to add or replace.

Businesses, managers, and teams will do the same. In fact, many already are. They're revisiting goals, clarifying priorities, and determining the best way to achieve those goals with the people and skills they have, or getting creative in finding the people and skills they still need.

Because the truth is, there is a lot of work to be done in 2023.

Trends in Engineering and Sciences

Job openings and unemployment rates in Engineering and Sciences continue to reflect a significant shortage of workers with these skillsets. Between October and December, there were .3 or less unemployed workers in Engineering and Sciences labor categories to fill open positions.

We've extracted a few highlights from this month's employment trends in engineering and sciences. For a complete rundown, download the data report.

• Construction. Adding 28,000 jobs in December, companies also hiked wages in anticipation of continued labor shortages into 2023, especially as funding from the Infrastructure Law, CHIPS Act, and Inflation Reduction Act is anticipated to kick off several projects in the coming year. Since 2019, Project Managers and Civil, Industrial, and Electrical Engineers in this industry have grown in demand by more than 20 percent.
• Manufacturing. Boeing Co. and Airbus SE are facing a backlog of an estimated 12,720 aircrafts due to supply chain issues, labor shortages, and fast-growing demand. Their most popular single-aisle passenger jets could be sold out until at least 2029. The good news: aircraft backlogs are so severe that the industry is practically recession-proof, and employees don't need to be too worried about layoffs. Manufacturing as a whole is expected to have a slower year due to higher costs, normalization of orders, and global economic uncertainty. Labor demand will likely vary by sub-category, and even by company.
• Utilities and Energy. Exxon Mobil and Chevron have sold several international assets as they aim to shrink their global footprints and focus their efforts closer to home in North and South American countries (US, Canada, Argentina). This most recent example of companies re/nearshoring business in the last couple years is expected to drive up demand for skilled workers in these countries. Due to grid hardening and buildout projects, substation and transmission engineer demand is 208 percent higher than it was in 2019.

Connecting the Dots

1. Skills-based Hiring. We know companies are conducting audits of critical skills needed to get important work done, and now Roblox is hiring for them.The company created a video game for job candidates that assesses their capabilities—or potential for capabilities—in 15 skills determined critical to company success, all while avoiding hiring biases in the process.
2. Promising Results for Skin Cancer Vaccine. Early data reveal promising results in a melanoma vaccine trial. Patients who underwent surgery and received a combination of the experimental mRNA vaccine and an immunotherapy drug experienced a 44 percent reduction in the rate of death or recurrence compared to those who underwent surgery and took the drug but did not receive the vaccine. Jason Luke, director of the Cancer Immunotherapeutics Center at UPMC Hillman Cancer Center in Pittsburgh, is quoted in the article as saying, this example of personalized medicine is where “genomics meets computational biology meets immunology meets my patient in my clinic.”
3. Massive Investments in US Manufacturing and Utilities. Last month we reported on the massive investments in stateside solar energy and semiconductor plants, and the news keeps coming. Qcells just announced a $2.5B expansion of its solar manufacturing plant in Georgia—the largest private investment in U.S. solar manufacturing ever. The company is expected to break ground later this year and open for production in 2024, adding 2,500 jobs.