Employment Situation Report: December 2022

The Jobs Report was released last Friday, and it continues to show a strong labor market in the face of possible recession with continuing Fed rate increases. The unemployment rate fell to 3.5%, down from 3.7%, and the labor participation rate remained steady. So far, many of the labor metrics have remained near pre-Covid levels experienced in February 2020.

There are two reasons why the job market stubbornly remains at pre-Covid levels. The first is generational, which was predicted by Roger Herman in his book Impending Crisis: Too Many Jobs, Too Few People, where he noted the BLS forecasting of a worker shortage of 10M+ people by 2010. The worker shortage is further exacerbated by the fact that baby boomers began turning age 65 at a rate of ten thousand people per day starting in 2016. Then came Coronavirus lockdowns, which prompted many baby boomers to leave the job market and never return. The generations that follow are not large enough to fill the gaps left by these retirees.

The second is the Coronavirus lockdowns that resulted in the mass work-from-home phenomenon. The distributed workforce created many challenges for employers, but none bigger than people having more job options than ever before at their fingertips. In the past, people mostly looked for jobs in their immediate location, but now they can consider work-from-home options nearly anywhere. This, along with the dramatic jobs increase post-Covid, caused the “Great Resignation,” in which employees voluntarily resigned from their positions en masse.

Because of these two outcomes, we expect the jobs market will remain robust through 2023, regardless of the Fed’s actions.