CertiPay’s Market Outlook - October 2022
The hiring market has shown signs of slowing down with its most recent jobs report, but unemployment dropped yet again—this data coming before the impact on the market felt by Hurricane Ian.
While job creation has slowed, and many large corporations have begun shoring up their labor force or initiating a hiring freeze, the same can’t be said for small businesses as they are still actively looking to fill positions.
When job growth slows, that’s an indicator that the labor market is cooling off. This has been supported by the latest data, and yet, the unemployment rate dropped again last month.
With so much uncertainty still surrounding the market, and following Hurricane Ian and its impact on Florida and the Carolinas, economists are bracing for the economic downturn.
Job openings decrease to 10.1 million, according to the most recent Job Openings and Labor Turnover Summary (JOLTS).
Job creation slowed to its lowest level in nearly a year and a half. The job market remains strong with the “nonfarm payroll employment” increasing by 263,000 in September. While that’s still a significant increase, it’s less than the Dow Jones estimate of 275,000.
Hurricane Ian had “no discernible effect” on unemployment or employment data for September, but any change would likely be seen in the next report, according to the Bureau of Labor Statistics.
Unemployment rates fall back to 3.5%, which is where it was in July.
Outlook for employers: A mix of headwinds and tailwinds
For months, there has been discussion between politicians, economists, and other industry professionals over whether or not we were truly in a recession.
Ultimately, it comes down to how you define it. The way recession has been traditionally defined is by having two consecutive quarters of negative Gross Domestic Product (GDP) growth, and so by that definition, the United States has been in a recession since the summer of 2022.
However, the National Bureau of Economic Research (NBER), defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” By that definition, we haven’t been in one.
What we do know is that this “recession,” is unlike other recessions of the past. We have a competitive labor market that, until recently, hasn’t shown much sign of slowing down. The most recent JOLTS report did show a decrease in the available jobs, and the number of jobs growth this month fell short of what the Dow Jones estimated at 275,000. Still, the unemployment rate dropped yet again by 0.2 percent and average hourly earnings have risen 5% from a year ago.
“We’re currently in a recession, but the major impact of that hasn’t been felt yet based on what we’re seeing,” CertiPay CEO Denny Wilson said. “We’re seeing more employees move toward their desired locations, especially hourly employees that are constantly looking for jobs that meet more of their [career] pathway.”
Job candidates are currently presented with more opportunities to pursue the work they desire, Wilson says, and while it still might not mean “greener pastures,” they have the opportunity to have more flexibility and save on their daily commute. There have also been continued exits from older working generations who are retiring, which has given more leverage to the candidate.
This ability that candidates now have to easily shop around with new technology and find the best job opportunity, as well as the volume of available jobs, has directly led to better wages, and as Millennials and Gen Z start to “get their footing” in the career paths of their choosing, you could start to see even more movement of people as they find their desired job in their desired location.
That might only have a greater impact on small businesses in the short term. Layoffs for large corporations are “creeping up as U.S. job creation slows to its lowest level in nearly a year and a half.” For example, Facebook’s parent company Meta “is implementing a hiring freeze.” These layoffs have not been happening at the same rate for small businesses, though, according to Wilson.
“Large companies are making big moves toward shoring up their labor force, and I think we’re going to be seeing more and more reports of large companies reducing their labor forces, which No. 1 might create opportunities for smaller companies,” Wilson says.”The smaller companies that we work with in the SMB are not cutting their labor force, they’re still trying to fill openings. That’s an opportunity for smaller companies, but they're going to have to be responsive to the marketplace.”
The Impact of Ian
Hurricane Ian was one of the most powerful hurricanes to hit the United States, and experts say it will cost billions of dollars to rebuild parts of Florida and the Carolinas that were destroyed by this massive storm, which left dozens dead and millions without homes, businesses or even power or running water.
It’s unknown what the true impact of this hurricane will be on the economy and an already strained supply chain. Economists say now “tens of thousands of people are likely to file for unemployment benefits in the storm’s wake.” Many of those jobs are in the tourism industry, which can have detrimental effects on those local economies.
However, with an influx of federal relief and private money coming in as part of the relief effort, you could even see accelerated growth of jobs and an escalation of wages specifically across the Southeast in certain fields such as construction, electrical, etc., Wilson says.
“The sheer volume is going to be incredible,” he says. “It’s going to be an income multiplier for SMBs in the Southeast, and those are businesses that are going to help single-family homeowners.”
Hurricane Ian is looking to be one of the most costly natural disasters of recent years, and while it could prop up certain industries in the short term, we don’t know yet what its impact–positive or negative—would be on the country’s economic growth as a whole. There will likely be a spike in jobless claims in the next few months, and this would affect the unemployment rate, which is back to pre-pandemic lows. If job creation continues to slow, that would only have negative effects on the economy at the local level and nationwide.
We’ll get a better picture of the direct impact this has on the Market over the next few months.
Bureau of Labor Statistics: Job Openings and Labor Turnover Summary
Washington Post: The job market is slowing, and this could just be the beginning