It’s still an employees’ market, even amid high inflation and talk of a possible recession.
But there are some signs that could start to change.
One key reason: The Federal Reserve’s 0.75 percentage point interest rate increase announced on Wednesday likely won’t be its last as it moves to tamp down historic high inflation.
That could lead to “some softening of labor market conditions,” Federal Reserve chair Jerome Powell acknowledged on Wednesday.
Record high job openings, which totaled 11.2 million in July, may “come down significantly,” he said. The rate increases may push up unemployment, which stands at 3.7%, according to the latest jobs report.
Recent research from Challenger, Gray & Christmas found layoffs are at record lows as the labor market stays strong.
In the first eight months of the year, employers have announced plans to cut 179,506 jobs, the lowest recorded total since Challenger began tracking those job cuts in 1993.
The 2022 total is also down 27% from 247,326 cuts for the same timeframe in 2021.
Today, there are two open job listings for every unemployed person in the country, a “pretty remarkable ratio,” according to Andy Challenger, senior vice president at Challenger, Gray & Christmas.
“This is the hottest labor market we’ve seen in our lifetimes, and it’s not going to stay that way forever,” Challenger said.
It’s still a great time to switch – with one caveat
As inflation has hit historic highs, a recent survey from Bankrate.com found 55% of workers say their incomes have not kept up with rising household expenses.
The best way to negotiate a big pay increase often comes with a new position, experts say.
“That’s one of the best ways to boost your pay is to look externally,” said Vicki Salemi, career expert at Monster.com.
Inevitably, today’s hot job market will cool. It’s just a question of when.
Six months ago, Challenger said he would have predicted the labor market would have cooled more than it has. By this time next year, it likely will have cooled significantly.
But now may still be a good time to make a switch, he said.
“If you’re unhappy and feel like you’re underpaid, you’re not going to find a better environment to find a new position or renegotiate a year from now,” Challenger said. “It’s very, very unlikely.”
One caveat to that is that many companies have a last in, first out policy, which could make newly hired workers more vulnerable if a company decides to implement mass layoffs, he said.
Certain sectors are more vulnerable to cuts right now, Challenger’s research has found. Cuts in the technology sector are up 70% over the same period last year. Meanwhile, cuts in financial technology have surged 765% over last year, while the automotive industry has seen a 232% increase in job losses.
Layoffs do not necessarily have to be the trigger for an increased unemployment rate, Challenger said.
If the labor participation rate increases — and people who are currently on the sidelines come back in — that could increase unemployment as the number of open positions shrinks and it takes longer for people to find jobs.