The Q2 Jobs Reports Review: Labor Market Stabilizing, Layoffs Slowing, Inflation Cooling
As summer heats up, the labor market is cooling, which, in the larger economic outlook, can prove to be a positive development. After several consecutive months of historic job growth (marking a rebound from pandemic-related layoffs), more predictable outcomes create the balance that’s much needed in an unstable economy.
Now that we’ve reached the halfway point of 2023, we’re building upon our coverage of the 2023 jobs reports issued by the U.S. Bureau of Labor Statistics and examining what the Q2 surveys can tell us about the state of our economy and the future of employment.
Preferred Office Network follows these fluctuations closely to help companies create successful workplaces in today’s current climate. In our continuing series, we break down the Q2 jobs reports to see what they reveal about where the future of work is headed for the remainder of the year … and beyond.
By the Numbers
Q2 2023 got off to a robust start, with April and May’s payrolls both beating expert predictions and proving the jobs market remained resilient. The data proves that the U.S. labor market has recovered by nearly every measure in the wake of the pandemic. But all of those continued gains can prove problematic for the larger economic picture, pushing unsustainable wage increases that contribute to inflation.
Things began to level off in June, with a gain of 209,000 jobs, less than estimates, but still reflecting healthy and tenable growth. That’s the least amount of new jobs added in one month since December 2020 when the economy started its slow recovery from pandemic-related losses. More good news: The unemployment rate fell to 3.6% and average hourly earnings rose comfortably — 4.4% on a year-over-year basis, up from a 4.3% pace in May. This latest wage growth data reveals that American workers’ earnings increased enough to not have been wiped out by soaring prices.
In addition, inflation also cooled significantly in June (its slowest pace in more than two years), fueling more optimism for a so-called “soft landing” for the U.S. economy after months of speculation amidst the Federal Reserve’s rate hikes. Interest rate increases work to halt inflation partly by slowing the job market and holding back wage increases, so the Fed’s fight against inflation and the strength of the labor market are closely tied.
If inflation can lower sustainably without a jump in unemployment or an economic recession, it could allow workers to hang on to the momentum they have made over the past three years since the pandemic: jobs that offer better pay, improved work-life balance, enhanced workplace wellness, and greater flexibility.
The View From Another Vantage Point
Payrolls processing firm ADP conducts its own employment research each month and found that private employers added 497,000 jobs in June, crushing a Dow Jones prediction of 220,000 and demonstrating the largest monthly gain in private-sector jobs since July 2022. Annual pay also increased by 6.4%, down from 6.6% in May, indicating slow but sustainable growth.
The leisure and hospitality sector led the gains in private-sector job gains, with 232,000 new hires, followed by construction, trade, transportation, and utilities.
Who Is Hiring?
The Bureau of Labor Statistics reports show the largest gains in the healthcare and social assistance sector as well as in state and local government. In fact, an unusually large contributor to the June survey was the almost 60,000 rise in government jobs, representing nearly 30% of the total increase.
Many of these industries are part of the diverse Preferred client ecosystem, demonstrating that offering employees access to flexible workplaces is an important employee benefit and a powerful tool in talent attraction and retention.
What About Layoffs?
The beginning of 2023 was marked by headlines of high-profile layoffs at some of the country’s most well-known companies across a range of industries including manufacturing, big tech, entertainment, banks, and startups.
Recent reports show a reverse of this troubling trend, with layoffs dropping nearly 50% from May to June, a seven-month low. Job cuts in the tech industries, one of the hardest hit sectors earlier this year, began dipping in April, and many companies are continuing their hiring practices. In its Workforce and Learning Trends 2023 report, CompTIA found that 71% of HR professionals are hiring for growth and 52% were continuing to backfill hires in the pursuit of adding employees with the necessary skills that can help organizations gain or maintain their competitive edge.
And, as fewer workers voluntarily leave their jobs for greener pastures — effectively bringing to an end the much-hyped Great Resignation of 2020-2022 — employers and employees are recognizing their value to each other.
How Flexible Workplaces Factor into Jobs Growth
Employers are finding other ways to keep workers productive and on the payroll without untenable wage increases that drive up inflation. In today’s evolving workforce, access to remote/hybrid work is the #1 determining factor in an employee’s decision to stay with a company, improving retention odds by 62%. More than 78% of employees believe hybrid and remote working has improved all aspects of well-being, enabling them to care for their whole selves in their roles at work and outside of work.
Flexible workspaces play an important role in solving for this ongoing shift in how people want to work and how employers can meet the needs of an evolving workforce. Keeping employees engaged helps organizations stay competitive, innovative, and productive, helping to insulate the economy from future challenges.
We’re already tracking the economic and employment developments of Q3 2023 to bring our clients more insights on shaping the workplace of the future. We are committed to providing an array of workplace solutions to help your company succeed in this age of rapid transformation.