A Mid-Year Labor Market Report

8/12/2021
 

Fireworks weren’t the only thing booming as we reached the midpoint of 2021. The U.S. labor market is on fire and looks to be very promising moving into the second half of the year. Recovery trends have been overwhelmingly favorable in select cities and industries; however, some segments are still lagging in growth.

We’ve been waiting on an explosion of job growth to happen, and June finally delivered. The 850,000 jobs added in the month was equivalent to the combined total of the two months before it. And the labor market appears to be picking up steam as businesses try to capture skyrocketing demand in many industries. While it might be hard to sustain pace throughout the rest of 2021, the surge in job creation was a welcomed sight after recent disappointing figures.

The nation is in place to set off a massive wave of hiring, but perhaps the labor market has hit a tipping point or is on the verge of it. The number of job openings, as well as people voluntarily leaving employers, hit all-time highs in recent months. The U.S. has 9.2 million jobs open, with more than half of the opportunities in healthcare, leisure and hospitality, retail, and government, each of which have 900,000 or more jobs available.

To fill the open roles, talent acquisition professionals are poaching from other companies at a rate we have never seen. A combined 7.6 million people quit their jobs in April and May, more than any two-month stretch on record, and most often workers are accepting a new role. The massive transition of talent will surely continue throughout the summer.

 

Top Employment Locations

Approximately 14 months after the pandemic began to fully impact the labor market, Salt Lake City became the first of the 50 largest metros, by population, to reach its pre-pandemic employment level in June 2021. Phoenix, Jacksonville, Tampa, and Austin are currently poised as the next locations to recapture all lost jobs, each within 1.5% of their previous employment totals.

It was expected that certain metro areas like New York and Los Angeles would see an enormous number of jobs added in 2021, and thankfully, the improvement in those labor markets has not disappointed. Combined, just those two metro areas added more than 364,000 jobs in the first half of 2021. Other areas, such as Atlanta, Boston, Minneapolis, Phoenix, and San Francisco, added more than 60,000 jobs each in the first six months of the year.

Unfortunately, a handful of locations had fewer jobs at the end of June than when the year started. Cleveland, Richmond, Hartford, and Virginia Beach had between 1,000 and 3,000 fewer jobs in June 2021 compared to the end of 2020. Still, it is expected for these areas to get back on track for positive growth during the second half of the year.

 

Not All Industries Fare Equally

Turning the focus to industries, it is not surprising to see some of the hardest hit businesses in 2020 showing major improvements with the rise of consumer demand in recent months. Restaurants and drinking places added 1 million jobs from January through June, and arts, entertainment, and recreation venues added 327,000 jobs.

More than 525,000 jobs were lost in educational services at the early onset of the pandemic, and with many schools closed for in-person learning, only 68,000 jobs were recouped in 2020. Fortunately, this sector is putting people back to work with 203,000 jobs gained thus far in 2020.

Disruption in schooling, particularly for young children, has weighed on the ability of many parents to re-engage in the labor force. Elementary and secondary schools have recaptured half of the jobs lost, which could start to have a positive impact on the labor market as more children go back to in-class learning this fall.

The impact on nursing-care facilities was highlighted early and often during the pandemic, and the industry continues to suffer from the effects of the virus. Employment has declined every month since February 2020, including an additional 58,000 jobs lost this year.

Grocery stores and home-delivery services, meanwhile, benefited from pandemic-induced behavior changes and are now seeing demand for their goods and services moderate. In the meantime, food and beverage stores lost 56,000 jobs so far in 2021, and couriers and messenger jobs are down 34,000.

The financial activities sector, which is the closest of all industries back to pre-pandemic job levels, even experienced some losses. Commercial banking businesses have lost 25,000 jobs this year, and insurance carriers have lost 8,000 jobs.

 

The Outlook

The labor market has entered the back half of the year on an upswing, but the threat of the Delta Covid variant and the recent rise in cases adds a degree of cloudiness to the outlook. Mask mandates are back in effect in Los Angeles County due to rising virus counts, and we all will be watching tighter restrictions on businesses to be reintroduced where hotspots may re-emerge.

The base case is for U.S. employment to recapture all lost jobs by 2023. To get there, more people will need to rejoin the labor force. As of June 2021, an almost 3.4 million fewer people were with a job or seeking employment.

Of the 9.5 million unemployed people looking for work, there is hope that the expiration of additional unemployment benefits in September will lead to more people back to work. Continue to expect outsized hiring numbers in food services and accommodations, as travel increases, consumer spending habits resume pre-pandemic behaviors, and more workers truly re-enter the labor market.

Also, inflation will be a closely monitored statistic by economists, and it will continue to garner headlines. Consumers are facing price hikes for a variety of items, especially automobiles. Employees are seeking higher wages to offset some of the increases, and the tight supply of talent often puts them in the control seat, particularly in fields such as legal, healthcare, and technology, which all have unemployment rates of 3% or less.

Businesses will feel the pressures that come with inflation as it relates to employee wages, as well as the cost of goods and services to remain operational. As organizations prepare budgets for the 2022 fiscal year, business leaders will have to face the realities of increased costs of living and the accompanying compensation demands — and what other companies are willing to pay to attract the best talent in their fields.

 
 
Jay Denton serves as senior vice president of business intelligence and chief innovation officer at ThinkWhy. In addition to leading the company's business intelligence unit and product innovations, his expertise in market analytics and media engagement is a cornerstone for the organization. Prior to joining ThinkWhy, Denton was senior vice president of business intelligence at one of the largest U.S. multifamily investment and management firms. He led the company's market research efforts, as well as the creation of the company's next-gen BI platform, which was described as a key differentiator during subsequent fundraising initiatives. Denton brings more than 15 years of leadership experience in SaaS organizations.
 
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