When it comes to the job market, it’s a pick-your-cliche season. The best of times, the worst of times. A tale of two cities. The great divide...
The August jobs report, released on Friday, showed an increase in 130,000 nonfarm jobs, below expectations, while the unemployment rate remained 3.7%, near a half-century low. As has been the trend for much of this year, growth in a few key areas, namely professional and technical services and healthcare, is masking flat growth or declines in other areas such as manufacturing and retail.
“Organizations aren’t stopping hiring data scientists because of a potential downturn. Those kinds of jobs are thought of as a different bucket,” says Melissa Swift, a Korn Ferry senior client partner and the leader for the firm’s Digital Advisory for North America and global accounts.
In August, 61,000 were in professional and technical services and healthcare. By contrast, jobs in construction, retail, and transportation, were either flat or declined slightly. Manufacturing employment, which experts have worried would decline, gained 3,000 jobs, (the sector employs 12 million people).
Organizations added on average 158,000 jobs per month this year, with the 312,000 jobs added in January representing the high water mark and the 56,000 added in February representing the low point. In 2018, employment gains averaged 223,000 per month.
More concerning, however, is the fact that job additions were revised downward from original estimates in June and July. With economists already forecasting GDP growth of less than 2% for the remainder of this year — second quarter GDP growth was also revised downward from 2.1% to 2%. The worry is that the downward revisions could signal the arrival of a recession.
“If companies hold off on hiring and/or offering wage increases due to a more negative forecast for the balance of the year, then the impact could be felt in consumer spending,” says Ron Malachuk, a principal in the Global Industrial Markets practice at Korn Ferry. To be sure, robust consumer spending has been the driving force behind the U.S. economy this year.
Swift says two factors distinguish how organizations are looking at their current talent needs amid the current environment. One is that hiring is being driven much more by individual circumstances than the economic cycle. “Different industries and organizations are getting hit with different headwinds,” says Swift. “There is less of a herd mentality around reacting to a potential recession. Organizations are taking a more nuanced and innovative approach to talent and hiring.”
One approach organizations are taking, for instance, is to focus more on reskilling current talent, in part because of the extremely tight job market — the total labor force came in at a record high 163.9 million. Swift says part of the decline in manufacturing jobs can be attributed to the fact that people are being moved out of those roles to be reskilled in coding or other digital transformation jobs.
“Many organizations simply can’t hire enough people to meet their talent needs even if it made economic sense,” says Swift.