The 187,000 jobs added by employers in July signal that businesses remain confident in adding new positions in addition to backfilling open roles. July’s job gains bring the 2023 total to 1.8 million through the first seven months of the year.
Job gains have certainly begun to normalize, and July’s total is just below the pre-pandemic average of 200,000 jobs added per month.
Job gains for both May and June were revised downward by a total of 49,000, suggesting the labor market was a bit cooler the past two months than the initial numbers indicated. Downward revisions have become the norm over the past few months.
With these revisions, June became the first month where job gains fell below 200,000 since December 2020. The labor market has continued to normalize, with job gains approaching more sustainable levels compared to the records of the past two years.
Demand for Workers Starting to Slow
Despite job gains returning to a pre-pandemic level, the labor market is among the tightest in history, and the shortage of talent continues to prove challenging for many businesses.
Job openings are a key indicator of labor demand. And June’s job openings, reported earlier this week, showed signs that hiring plans have cooled, but the demand for talent is still out there.
Job openings held steady at 9.6 million. While job openings have declined from last year’s average of just over 11 million per month, they’ve remained persistently higher than the 2015 to 2019 average of 6.4 million monthly job openings.
As demand for workers starts to moderate, we’d expect record wage growth to ease, but July’s jobs report shows 12-month wage growth was unchanged at 4.4%. Wage growth has hovered around 4.4% all year long and doesn’t seem to be slowing. But with inflation starting to cool, workers should start feeling some relief.
Layoffs Hold Steady as Unemployment Ticks Down Slightly
Hiring is still quite robust, and layoffs have not increased at the pace many projected. Layoffs held steady in June at 1.5 million, below the 1.9 million monthly average layoffs before the pandemic.
And the unemployment rate ticked down to 3.5%, matching pre-pandemic lows. With 9.6 million job openings, and just under 6 million unemployed workers available to fill those open roles, there are 1.7 open jobs for each unemployed worker.
Our prediction for the second half of 2023 is that the labor market will continue moderating to historic norms. But with a labor force that’s not growing as fast as demand and an unemployment rate near historic lows, the labor market will remain incredibly tight and competition for talent is unlikely to let up.
Companies will need to watch the labor market and track compensation trends closely this year to stay competitive.