August 2023 Labor Market & Economy Report: 'Soft Landing’ Remains Tricky Business

By Mike McGuire | September 15, 2023

Regarding fear, legendary filmmaker and master of suspense Alfred Hitchcock said this: "There is no terror in the bang, only in the anticipation of it."

Applying that quote (lightly) to the U.S. economy, public discourse about whether there will be a recession – the bang! – has persisted for twenty months, which is two months longer than the longest actual recession since 1945.*

That's a lot of anticipation, even by Hitchcock's standards.

The ideal outcome – a.k.a. "the soft landing" – would be for the economy to gradually weaken until inflation reaches 2%, without going into a recession (no bang).

To that end, The Fed has raised interest rates eleven times since March 2022. The pay-off, if the strategy works, is demand and prices will right-size, anticlimactically, with less consequence compared to unchecked inflation.

Yet, if anticipation has taught us anything, it's that the soft landing remains a tricky business.

Tricky not just because it puts us in the awkward position of temporarily rooting for (or at least not rooting against) typically unpleasant things – higher interest rates, decreased investment, slower business and wage growth, higher unemployment, etc. – but more so because the longer we wait for the soft landing, the harder it is to tell if we're getting closer to the outcome we want or the outcome we're trying to avoid. It's like having an alliance on Survivor.

True to form, indicators of a soft landing in August were mixed: the labor market showed signs of cooling off, yet inflation rose again for the second straight month. For every action, apparently, there is an equal, opposite reaction.

Whatever the eventual outcome, here's to hoping anticipation is the worst of it.

(As always, for the latest data and analysis on unemployment, job gains, wages, real earnings and inflation, download our full report.)

*For the record, there have been thirteen U.S. recessions since WWII, which equates to about one every 6 years, each lasting just over 10 months on average and varying in severity.

Unemployment and Labor Force Participation Rates Nudge Upward – Cooling, Cyclical, or Coincidence?

Unemployment rose from 3.5% to 3.8% in August. That's the highest it's been in 18 months, but still just above the 3.7% it was at a year ago. Labor Force Participation (LFP) also increased for the first time in six months, adding 736,000 workers to the tight supply (597,000 of that number were new entrants, without previous work experience). A similar scenario between unemployment and LFP played out last August without any sustained effect. We'll have to see if this is an actual sign of cooling, a cyclical blip, or a coincidence.

BLS Revision Shows Job Growth Less Than Previously Estimated, But Still Strong

Total Payroll Employment as of March 2023 was revised downward by 0.2% (-306,000 workers) from 155.47 million to 155.17 million workers. That means overall job growth numbers for the second half of 2022 and 2023 to date have been a little less robust than previously estimated, but still strong. Private sector employment decreased 358,000 workers, while government sector employment actually grew, post-revision, by 52,000 workers. A second revision is scheduled to be released in February 2024.

Job Quits Down 14% in Two Months; Job Openings Down 8%

Job quits dropped for the second straight month, from 4.1 million in May to 3.8 million in June to 3.5 million in July. That's a 14% decline in two months, which coincides with an 8% decrease in Job Openings over that same period. Year over year, job openings have decreased 22% and job quits have decreased 12.5%

Inflation Heats Up in July and August

Inflation rose again from 3.2% in July to 3.7% in August. Rising gas prices, along with stubborn housing and supercore services prices – categories that are less susceptible to interest rate hikes – remain the hurdles to reaching 2%. Overall, inflation is still way down from last summer's peak of 9.1%. But if its downward trend is stalled or reverting backward, the question becomes: is another interest rate hike imminent and will it be the answer? Predictions are The Fed won't raise interest rates in September, but it could in November if inflation doesn't show movement in the right direction.

Strong consumer spending also continues to heat the economy, but "insiders" don't necessarily agree why or for how long.

STEM Labor Market Remains "Constrained"

While the overall labor market appears to be cooling, that's still not the case in STEM categories. Here's an excerpt taken from the Federal Reserve's most recent Beige Book report: “... most Districts indicated imbalances persisted in the labor market as the availability of skilled workers and the number of applicants remained constrained.” Those sentiments reflect the current BLS unemployment data for STEM, broken down here:

Unemployment rates by industry: Unemployment rates by labor category:
Overall unemployment: 3.8% Software-Hardware-IT-& Mathematics: 2.1%
Hospitals: 1.7% Architecture & Engineering: 1.7%
Utilities: 1.6% Sciences – Life, Physical, & Social: 2.4%
Professional & Technical Services: 2.7% Unemployed workers per job opening in STEM categories: 0.3
Manufacturing: 2.7%
Construction: 3.8%

Connecting the Dots Between Labor Market Trends + Real World Impact

In Architecture & Engineering, learn what percentage of architectural firms nationwide still report being understaffed in Actalent's Labor Market & Economy Report. Also find out the big reason engineering and design services companies are showing signs of accelerated activity.

In Scientific R&D, read about which companies were awarded $1.4 Billion to develop next generation Covid-19 vaccines, and why recruitment in Healthcare for HEDIS nurse season this January is likely to start in September; plus, what healthcare providers should consider before cutting labor costs to allay operating costs.

Actalent's Labor Market & Economy Report is a comprehensive look at STEM labor market trends, including trends across all the industries we support: Automotive, Aerospace & Defense, Architecture & Engineering, Consumer & Industrial Products, Construction, Healthcare, Scientific R&D and Utilities.

References: Actalent's August 2023 Labor Market & Economy 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 and references are included as a companion to this article.

If you'd like more information on the data presented, or have questions about the information provided in this report, please contact our team at:

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