After months of headlines about layoffs in tech and other sectors, the February jobs report and inflation report from the U.S. Bureau of Labor Statistics surprised many leaders. Continued tight labor markets, unfilled jobs and higher-than-anticipated inflation led many to ask, “What’s going on?”
The reports show some signs of reduced tension on labor markets. For example, jobless claims rose for the first time in six weeks. Further, over the past 12 months, average hourly earnings increased by 4.4%, a lower average increase than reported during the summer (for example, 5.2% in July 2022).
However, labor markets remain tight and inflation remains high. Total nonfarm payroll employment rose by 517,000 in January, the unemployment rate showed little movement since early 2022, and the labor force participation rate remained steady and still below pre-pandemic levels. The number of job openings increased by 6.7% to 11 million in December, indicating companies had even more unfilled positions than before. Inflation, while trending down annually, jumped in the month of January.
Recent conversations with executives and board members across industries suggest five factors are behind these trends:
While job eliminations are devastating to those impacted, and layoffs in tech have been well publicized, they have not had a significant impact on the 11 million open roles currently in the U.S. They do, however, create opportunities for other industries.
Many sectors reflect rebounds from the pandemic. For example, hiring levels in travel and hospitality and in entertainment are up significantly. The automotive sector is again increasing capacity.
Conversely, technology companies are shedding units that are no longer growing and distribution companies are retooling their models. These puts and takes on labor markets create opportunities while keeping them tight.
Effective leaders understand that talent shortages are here to stay despite layoffs, and they predict that inflation – while declining slowly – will remain a factor in the medium term. These leaders appreciate the long-term nature of the associated challenges and have moved beyond what many called The Great Resignation and Quiet Quitting to address deeper challenges. Now, they are taking action by embracing talent strategies to create workplaces where people want to be regardless of circumstance.
They differentiate culture and employee experiences while maintaining competitive pay and bonus levels. They know that providing workers with flexible work, pay, benefit and skill development programs is table stakes in the current environment. They reset total rewards to meet the needs of 2023’s workers and new ways of working. They use purpose as a guiding light to drive constancy in company culture and to thrive in an ever-challenging business environment.
A version of this article originally appeared on Forbes.com on February 16, 2023.
