“The proof of the pudding is in the eating.” It’s a very old saying that keeps finding new places to be relevant.
Like the American job market, for example. While pumping out huge monthly job gains for the past two-and-a-half years—just what it should have done—our job market is now cementing those gains. But to see it, we must look at it the right way. We must taste the pudding, as it were.
August job gains came in at 187,000—a far cry from the gaudy numbers of 2021, 2022 and the first half of this year—and the unemployment rate ticked up to 3.8%. Put those two together and it’s easy to see why critics are tripping all over themselves to declare that the job market is weak.
It is not weak at all. It’s just doing what we need it to do now. Meteoric growth like what we’ve seen is not sustainable and dangerous, as it would, sooner or later, require strong and frequent action from the Fed. The less of that, the better (although welcome when necessary). But what we needed then was job growth—and we got it. Plenty of it.
So how’s the job market remaining strong while job creation is at a slower pace? The Bureau of Labor Statistics’ Employment Situation Summary, further than most critics use when blasting or celebrating the job market’s performance, takes a deep dive below the surface. For instance, when is an uptick in the ranks of the unemployed not a bad thing? When the civilian labor force, the total of those who are working plus those who are looking for work, adds 736,000 while the ranks of the employed grew by 222,000. That difference of 514,0000 is extreme, and shows up from time to time, but is clearly attributable to strong confidence. Many of those people will find work soon. For the moment, though, they’re unemployed but optimistic.
Where will they find the work they’re so confident about? The BLS issues their Job Openings and Labor Turnover Survey (JOLTS). In it we see a dramatic fall in open jobs, from 12 million in March 2021 to 8.8 million in its most recent reading. There are, in other words, 1.4 open jobs for every job seeker. That ratio had reached 2-1, and the drop is the answer to where those new re-entrants to the
market have found and will continue to find work. This is a very healthy, harmonious situation.
To augment this scenario, the hires rate is still strong at 3.7%, but below the 4.5% during the
robust job creation period. At the same time, the layoffs rate remains historically low at 1%, indicating that employers are as heavily committed to retention as they are to recruitment. With hires still high, open jobs being filled and layoffs suppressed, this job market is doing exactly what we need: securing its position as the leader of the economic turnaround. Usually, you might be aware, the job market is subject to the forces of the economy. Since the pandemic, it’s been the other way around.
Here’s another thing. Wages are still rising, although at a slower rate than in the last couple of years. But, along with the rapid drop in the rate of inflation, it’s simple: Wage increases are outpacing inflation. Put that all together, and the result is that more people are working, making more money at their jobs, and there is still an abundance of jobs for those who are still looking.
The best job market performance, taken as a whole, does what’s necessary, not always the same thing. It’s all like how we measure and treat general personal health during our lives. As infants, the key is systems; we must ensure that all systems—autoimmune, circulatory, digestive, nervous—are working. As children and teens, it’s all about growth; adulthood is about maintenance; and the senior years are all about balance, endurance and defense against attackers of failing or weakened systems. Different protocols, different norms, different acceptable range of results.
I’ve seen this coming since 2023 began and have written regularly about it. My writings of the situation were the preparation of the pudding.
Now that the pudding is ready, it’s time to eat.
Eli Amdur has been providing individualized career and executive coaching, as well as corporate leadership advice since 1997. For 15 years he taught graduate leadership courses at FDU. He has been a regular writer for this and other publications since 2003. You can reach him at [email protected] or 201-357-5844.