Can anything stop blockbuster US job growth? Why it keeps rolling despite slowing economy, recession worries
Paul Davidson, USA TODAY
Sun, September 4, 2022
FrescoData has seen sales flatline this year, but that isn’t stopping the San Diego-based email marketing company from adding seven workers in coming months.
Last year, amid dire labor shortages, the 26-employee firm struggled to attract job candidates as it battled larger competitors offering higher pay.
“I’m preparing for the holidays,” says CEO Tony Raval, citing “the hardship that we faced last year not having enough people.”
Now, with recession fears mounting, some of those bigger rivals are laying off staffers, and Raval aims to scoop them up. “We’re looking to take advantage of that,” he says.
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Millions of businesses are taking a similar approach, helping the labor market defy expectations of a sharp slowdown and remain a pillar of strength in an otherwise wobbly economy. Consumer spending is moderating because of rampant inflation. The economy contracted the first half of the year (though top economists say we’re not in a recession). The Federal Reserve is aggressively raising interest rates to fight soaring prices. And the Fed’s campaign, along with the recession chatter, has hammered the stock market.
Yet somehow the job market has remained surprisingly strong, an achievement worth noting as the nation celebrates Labor Day on Monday. Job growth did slow to 315,000 in August following a blockbuster 526,000 in July, the Labor Department said last week, but that's still historically robust and it pushes the U.S. over the finish line in the recovery of all 22 million jobs lost in the early days of the pandemic. That translates to an average 438,000 monthly advances this year.
Several factors are driving the remarkable showing. Worker shortages have discouraged many businesses from laying off workers and prodded others to stick to their hiring plans despite the economy’s warning signals, economists and staffing officials say.
Also, many industries are still catching up after shedding employees during the COVID-19 recession. Americans have shifted their purchases from goods to more labor-intensive services, like dining out and traveling. And weak labor productivity – or output per hour of work – is forcing many employers to add staffers to meet demand.
“The labor market remains incredibly strong and is likely to remain so,“ says Traci Fiatte, CEO of professional and commercial staffing for Ranstad, an employment agency.
Economists do expect job growth to pull back as the Fed continues to raise interest rates to slow inflation and the economy, but at a slower pace than had been forecast.
Mark Zandi, chief economist of Moody’s Analytics, now expects payroll gains to average slightly more than 100,000 a month by the end of the year, compared with his estimate of about 50,000 several months ago.
A slowdown "is going to happen,” Zandi says.
In the short term, the robust job gains are providing Americans more income that they can spend, propping up the economy and staving off a recession, says Matthew Luzzetti, chief U.S. economist of Deutsche Bank. But the booming payroll additions and rapid wage growth mean the Fed probably will raise interest rates more aggressively to tame inflation, increasing the risk of a downturn by mid-2023, Luzzetti says.
Some employers are already hunkering down. Outlaw, which sells colognes, soaps and other fragrances online, has scrapped its plan to add three employees to its staff of 16 ahead of the holidays, says Danielle Vincent, CEO of the Sparks, Nevada-based company.
Danielle Vincent
“We’re concerned about the uncertainty,” Vincent says. She points to the recession worries and notes the company sells a discretionary product that could be hit hard if consumers tighten their belts.
Many companies, though, are forging ahead with hiring plans or at least avoiding layoffs.
Here’s why:
Worker shortages
Labor crunches have improved since schools have reopened, and enhanced unemployment benefits expired a year ago. But shortages are still severe. In July, job openings neared a record 11.2 million, or two for every unemployed American, Labor Department data shows.
So while lots of businesses are posting smaller sales gains or even declines, many have had such a tough time finding employees that they’re reluctant to lay people off. That haskept elevated net monthly job gains, which include all cuts and hiring.
Even if the economy continues to sputter or slips into recession, “they’re thinking, ‘Sales will rebound and I’ll have a hell of a time" filling the vacancies, Zandi says.
To be sure, some companies have announced significant job cuts in recent months, including Oracle, Amazon, Netflix and Ford. And initial jobless claims, a gauge of layoffs, have trended higher since spring. But they dipped recently and remain historically low. The share of all those employed who were laid off or fired was near a record low at 0.9% in July.
Many employers believe any downturn will be short-lived, and so they figure “'l’ll ride it out because (finding workers) is so expensive,’” says Jim McCoy, senior vice president of staffing firm Manpower. Some companies that need to trim staff are instead retraining employees and shifting them to other departments, McCoy says.
Employers generally aren’t hiring workers who aren’t needed now, McCoy and Zandi say. But Julia Pollak, chief economist at job site ZipRecruiter, says some hoarding is happening.
Raval, head of FrescoData, the email marketing company, says his hiring plans are on track even though sales are flat in part because “it will take three or four months for employees to get trained” so they’re in place for the holidays.
Tony Raval
Of recession jitters, he says, “What if there is no recession?”
Even some firms in the industry hit hardest by rising interest rates – housing – are hiring.
St. Louis-area home sales fell 23.6% in July from the year-earlier period, according to St. Louis Realtors, a trade group. But the Hermann London Group, a real estate brokerage in Maplewood, Missouri, is looking to add two administrative staffers and five to 10 brokers, says owner Adam Kruse.
“I think of it as an opportunity,” Kruse says. “Many realtors are getting scared” and cutting staffers. “I want to be one of those gaining market share.”
Catching up from COVID job cuts
Although the nation has recovered all the jobs wiped out in the pandemic, it’s a few million short of where it would be if the pandemic hadn’t happened. Leisure and hospitality – which includes restaurants, bars and hotels, sectors decimated by COVID-19 – is still 1.2 million jobs shy of its pre-pandemic level.
“If you look at spending at restaurants, it’s fully recovered, but there’s a huge jobs hole,” says Pollak, the chief economist at ZipRecruiter.
Many consumers, meanwhile, are still flush with more than $2 trillion in savings they socked away during the crisis and are resuming activities as COVID-19 eases, she says. Employers also are still struggling to fill longstanding openings created by the labor shortage.
Neema Hospitality, which owns a dozen hotel franchises in the mid-Atlantic region, finally crept close to its normal summer occupancy of about 80% the past few months as Americans hit the road despite record gas prices, president Sandeep Thakrar says. The company has hired 30 permanent staffers and about 20 temporary workers this year, but it still has about 25 openings.
“We’re always understaffed,” he says.
Other businesses say worker deficits are improving.
Forever Floral, which sells handcrafted artificial bouquets online, is adding 25 employees this year, says interim CEO Alex Ledoux. Sales at the 110-employee company have doubled in 2022 as couples hold weddings that were deferred earlier in the pandemic.
Forever Floral interim CEO Alex Ledoux
Despite the labor shortage, Ledoux says, the Ogden, Utah-based company is receiving about 100 applications per opening, versus about 10 earlier in the crisis.
The pivot from goods to services
As the pandemic has waned, Americans have shifted their purchases from TVs, furniture and other goods to services like dining out and moviegoing, says economist Bob Schwartz of Oxford Economics.
But such services require more workers than factories, which rely heavily on labor-saving technology. In July, services accounted for 402,000 of the 528,000 job gains, Schwartz says.
Weak productivity growth
Because the economy is adding workers while gross domestic product has declined, productivity, or output per labor hour, has fallen this year.
THIS DECLINE IN PRODUCTIVITY HAS ANOTHER NAME
One reason for the trend is that many employees who burned out after making up for absent colleagues earlier in the pandemic are resolving not to do more than the minimum. The trend, called "quiet quitting," is forcing employers to hire more workers to churn out products and services.
Whatever is behind this Teflon labor market, workers are reaping the benefits. Last November, Dominick Gula, a call center manager, decided to look for a warehouse supervisor job and got responses from 90% of the 25 or so companies he contacted.
Dominick Gula now works for Forever Floral.
Gula, 33, who lives in Sunset, Utah, got offers from two companies and accepted one from Forever Floral after Ledoux interviewed him personally and raised his proposed wage by 15%. Just months after starting, Gula is poised to get another 20% raise.
He didn’t respond to several prospective employers because they pushed him to start immediately.
“A few seemed desperate,” he says.
This article originally appeared on USA TODAY: U.S. job growth keeps surging despite slowing economy, recession fears
'There is no more retirement': Runaway prices are pushing seniors back to workSerah LouisSat, September 3, 2022 
“Unretirement,” or the act of going back to work after retiring, isn’t just for young Buccs like Tom Brady.Recent data shows about 3.2% of workers who were retired a year ago have rejoined the workforce — about 1.7 million people.That means the number of retirees heading back into the labor force is returning to pre-pandemic levels, says a spring report from the Indeed Hiring Lab.Yet John Tarnoff, a reinvention career coach based in L.A., says unretirement has been an underreported phenomenon for years.“The costs of living were going up even before the current inflationary cycle that we're in now — costs were rising, fixed incomes were no longer good for people, Social Security as an institution is under threat,” says Tarnoff.What is driving retired workers back to the labor force?Spencer Betts — a certified financial planner and chief compliance officer with Bickling Financial Services in Lexington, Massachusetts — says some retirees could be heading back to work due to high job vacancies and wage increases.Older workers may also feel safer now than they did during the peak of the pandemic, especially if they’re fully vaccinated.St. Louis Federal Reserve economist Miguel Faria-e-Castro reported over 2.5 million excess retirements due to COVID-19 as of August 2021. Many of these individuals could be heading back to work now that opportunities are available and money is tight.“Retirement is a misnomer — there is no more retirement,” says Tarnoff. “I think that older workers are going to be caught in a tight squeeze, because they don't have the income overall to keep up with inflation.”He adds that plenty of older workers may have been pushed out of the workforce during pandemic-related layoffs but didn’t voluntarily choose to retire.The mean income for households where at least one person is 65 years old or older was at just over $44,000 in 2017, according to the most recent data available from the U.S. Census Bureau. Social Security typically makes up the highest proportion of that income, at $16,560, and then earnings at $13,950.
Betts notes that plenty of older workers may still opt for part-time work once they hit retirement age.“I think the biggest trend — and it's been happening for many years — is … sliding into retirement, where it’s like, ‘I'm not going to work 40 hours, I'm going to work 30, 20, 10…’”
Higher income means higher taxesA retiree heading back into the workforce isn’t necessarily going to obtain the same job and salary range that they had before they retired. If you’re looking to come out of retirement, you need to watch out for the potential tax implications that a higher income brings in.Betts provides an example of a retiree with a consulting gig, which often means filing a 1099 form — a tax form for individuals earning money from a person or entity who is not their employer.“You might get the same amount of salary. But you're now responsible for both sides of the Social Security tax. So that's naturally like a 9% reduction in your pay.”Workers who have tapped into their Social Security benefits pay 6.2% on their earnings up to $147,000 — while those who are self-employed face a 12.4% cut that can be offset by income tax provisions.Your age and at what point you start receiving your benefits can also affect how much Social Security you’re receiving. The full retirement age for those born in 1943 through 1954 is 66, and then gradually increases each year until you hit 67 for those born in 1960 or later.If you’re below full retirement age, you can make up to $19,560 and receive all your benefits. “If you make more than that, then for every $2 over that number, you gotta give $1 of your Social Security back,” says Betts.In the year you reach your retirement age, you can make up to $51,960 to receive your full benefits. For every $3 over the limit, $1 will be withheld.
Depending on where you live and how high your state income tax rate is, almost half of your earnings can go to the tax man, adds Betts. “So make sure you don't price yourself too low.”
What else should you know when applying to jobs?
Betts says that if you have the ability to bring in more income, it’s usually going to be a net positive in the long-term.“They're probably taking less out of their investments, they're able to save more,” he explains. “Maybe they can put a lot of that towards future retirements, towards an IRA or investment account, or paying down debt more quickly.”When applying for a job, Tarnoff says the most important thing is to focus on your value as an employee — and consider adding new skills to your repertoire as well.“It's vital that older workers dive in and roll up their sleeves along with everybody else. There is no reason why an older worker can't learn the same remote work skills and technology skills as a younger worker.”Cleaning up your LinkedIn page and networking is crucial. Tarnoff also recommends zeroing in on the opportunities that best suit your skills and experience, instead of applying haphazardly to hundreds of job postings.
