Visualized: The State of the U.S. Labor Market
The last time the U.S. labor market was this strong was in 1969.
Unemployment fell to 3.3%, incomes were soaring to historic levels, and inflation was rising at a fast clip. Like today, the Federal Reserve was tightening monetary policy to stifle inflation. Yet much of the wage increases were washed out by rising consumer prices.
The above graphic looks at the industries driving today’s robust job market using data from the Bureau of Labor Statistics. Later, we look into the impact on inflation, and whether today’s market can be sustained.
What is Driving the U.S. Labor Market?
Broadly, service-led industries witnessed the highest share of job growth in January.
Still, as the table below shows, a key part of the services sector—leisure and hospitality employment—remains under pre-pandemic levels. A similar trend is seen in retail services.
|1||Leisure and Hospitality||128K||-495K|
|2||Education and Health |
|3||Professional and Business |
|7||Transportation and |
|12||Mining and Logging||2K||-55K|
Adding 1.5 million jobs since 2020 is professional and business services, the highest overall. This sector covers legal, accounting, veterinary, engineering and other specialized services.
We are also seeing strong gains in transportation and warehousing. Last year, the sector added an average of 23,000 jobs, totaling almost 955,000 over the course of the pandemic. Today, trucking jobs exceed 2019 levels and warehouse employment is roughly 50% higher.
Although manufacturing hasn’t seen the highest gains, the sector has one of the lowest unemployment rates across job sectors, at 2.4%. Yet the industry faces an acute labor shortage—if every skilled unemployed worker were to fill open job vacancies, a third of jobs in durable manufacturing would remain open.
Cooling Wage Growth
Despite rock-bottom unemployment numbers, wage growth is slowing. In January, it fell to 4.4% annually, down from a multi-decade high of 5.9% in March last year.
At the same time, wage growth falls below inflation by about 1%.
Wage growth is carefully watched by the Federal Reserve. Typically, their annual wage growth target is 3.5% to be compatible with 2% inflation.
In the current environment, this wage growth trend serves as a double-edged sword. As wage growth slows, workers are less likely to see wages keep up with inflation. On the other hand, slower wage growth could help prevent inflation from rising in the first place—and interest rates from climbing higher.
Where is the Job Market Heading?
The question on everyone’s minds is whether today’s job market will stay resilient.
According to Fitch Ratings, slowing aggregate demand in response to higher interest rates will begin to weigh on the U.S. labor market, and the 517,000 new jobs created in January—three times the level expected by analysts— won’t last long.
Eventually, both higher borrowing costs and elevated compensation costs could weigh on corporate profits. On the other hand, the pandemic has changed the labor market. Relief legislation may continue to buoy the job market and workers may also remain scarce as people retire or leave for other reasons.
Given how unemployment serves as a lagging indicator, the material effects in the economy will likely appear before cracks begin to show in the U.S. labor market.
Mapped: Unemployed Workers vs. Job Openings, by U.S. State
On average, there are 75 workers available for every 100 job openings across the country. Here’s how it varies by state.
Mapped: Unemployed Workers vs. Job Openings, by U.S. State
In the United States, there were about 75 workers available for every 100 job openings as of July 2023. This means there is a significant gap between labor and jobs available, but also many opportunities present in some states for potential job seekers.
This map, using data from the U.S. Chamber of Commerce, showcases the number of available workers per 100 job openings in each U.S. state.
Note: Available workers are unemployed workers who are in the labor force but do not have a job, have looked for one in the previous four weeks, and are currently able and available to work. Job openings are simply all unfulfilled positions that offer available work.
Workers and Job Openings by State
The below table lists out the number of unemployed workers per 100 jobs in every state.
Higher ratios, such as 110 workers per 100 job openings, mean there is more competition for each job opening in that state. Lower ratios suggest that it is harder to find workers in a given state.
|Rank||State||Available Workers per 100 Job Openings|
|#T31||District of Columbia||55.0|
While states like New Jersey and California have more workers that they know what to do with, states like North Dakota have a 0.35 ratio of people to jobs, potentially tipping the balance of power to job seekers.
Over the last three years, job openings have increased the most in the state of Georgia, where there were only 0.57 people available for every open role in July. But despite growth in open positions, unemployment has hardly changed over the last year, wavering around 3%.
The Reason for the Gap
“If every unemployed person in the country found a job, we would still have 4 million open jobs.”– U.S. Chamber of Commerce
According to the U.S. Chamber of Commerce, the main driver of the current labor shortage was the COVID-19 pandemic, forcing more than 100,000 businesses to close temporarily and resulting in millions losing their jobs.
Subsequent government support for those who lost work and other subsidies made it easier for people to stay home and out of the workforce. A Chamber of Commerce survey found that 1-in-5 people have changed their work style since the pandemic, with 17% having retired, 19% having transitioned to a homemaker role, and another 14% working only part time.
The industries with the highest unemployment rates are also those that have added the most jobs, with leisure and hospitality experiencing the highest rates (5.1%) just ahead of wholesale and retail trade (4.4%).
Overall, though the job marker has started to cool somewhat, hiring is still outpacing quit rates. The national quit rate in July 2023 was 3.8%, compared to a hiring rate of 4%. And with 9.8 million job openings in the U.S., there should be ample opportunities for job seekers.
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