Mid-Year Labor Market Trends
August 22, 2023
Where has 2023 gone? It’s a question I keep asking myself and I’m guessing many of you are asking the same thing. It seems we were just ushering in a new year, but a lot has happened — inflation rates are going down, fuel prices are $1 less than this time last year in many places and grocery prices dipped in March for the first time since 2020. At the same time though, tech, media, finance and, most recently, retail organizations have announced layoffs of thousands of workers — yet the economy has added an average of 341,000 jobs every month during the last 12-month period.
The 2023 labor market has economists, business leaders and a lot of others scratching their heads. As always, it’s difficult to pick a few “hot topics” when there are so many right now. Below are some of the 2023 mid-year items to keep in mind.
The Labor Market Conundrum: A Tale of Two Labor Markets . . . or What?
I reviewed several articles by economists and business leaders before writing this article in an attempt to get clarity around current labor market issues. The result: I’m more confused than ever but not feeling so bad because everyone else seems to be confused, too.
This economic roller coaster is best illustrated by egg prices. Egg prices increased over 70% during 2022. Prices in Arizona were over $5 a dozen in December, and that’s if you could find eggs. Flash forward to today, the most recent dozen I bought was $1.39. USA Today reports that wholesale egg prices are down more than 80% since December, with no single, simple explanation of why.
There’s quite a bit of good news out there for employers as it means:
- The debt ceiling deal reached in early June removed a lot of economic uncertainty for markets and decision-makers — at least in the short term.
- The debt ceiling deal is expected to have minimal impact on the overall economy. Goldman Sachs and JP Morgan estimate only a decrease of .1% -.2% in GDP over the next year.
- The June Federal Reserve decision to not raise interest rates — at least for now — will make borrowing money a bit more affordable for both businesses and consumers.
- The U.S. unemployment rate remains at historic lows. As of June, the number is 3.6%.
- The economy continues to add jobs at a brisk pace — 339,000 new jobs were added in May, 209,000 in June.
- Despite headlines describing massive layoffs, many of these job cuts are open positions, reductions through attrition and the need to recalibrate after “bulking up” hiring during the last three years.
With this good news however comes some areas of potential concern:
- Despite the Federal Reserve decision to hold interest rates at current levels, rates remain high. These high interest rates may be a deterrent to businesses desiring to expand and hire.
- The Federal Reserve has left the door open to additional interest rate hikes later in the year.
- The U.S. inflation rate was 3% in June, down from last year’s high of 9.1%. That’s still a high number, and disproportionately impacts low-income workers.
- Student loan payments, deferred since the COVID-19 pandemic, are scheduled to resume in September. These payments are often substantial and incomes in many households will be negatively impacted.
Pay Transparency and Pay Equity
I’ve written about both pay transparency and pay equity in the past, but increasingly we’re seeing the two terms used interchangeably. They aren’t really the same.
Pay transparency is defined by World at Work as “the degree to which employers are open about what, why, how and how much employees are compensated.” Pay transparency is often driven by legal requirements. These may include requirements that employers list salary ranges for open positions (four states plus New York City), prohibit employers from asking salary history in interviews (currently 26 states) and provide protection for employees that discuss pay (all employees covered by the National Labor Relations Act are protected).
Compliance with legal requirements often means that current employees find out about pay ranges for their positions from job postings or external applicants. Employers that are proactive about communicating compensation information to all employees will have a competitive advantage not only in attracting new employees but increasing employee engagement and satisfaction as well.
Pay equity is achieved by identifying pay gaps within an organization and taking steps to minimize/eliminate them. This is most often accomplished by conducting internal pay audits and adjusting salaries to address gaps and inequities.
There is considerable pay equity legislation, much of which is designed to address gender pay gaps. The federal Equal Pay Act sets a minimum standard for pay equity, but most states have either passed, or are considering, some type of pay equity legislation. State laws vary significantly, so it’s important to be aware of the legislation that applies to you and your employees.
To summarize, an increase in pay transparency, whether legally required or not, can result in an increase in pay equity.
Impact of Dobbs v. Jackson on Employers and the Workforce
The first anniversary of the Supreme Court decision that overturned Roe v. Wade has just passed. The number of questions and issues raised by the decision continues to grow.
The decision returned the power to regulate abortion to individual states. Abortion is now illegal in almost all circumstances in 15 states. That’s up from a total of seven states at the beginning of the year. An additional six states have proposed bans that are currently blocked temporarily by court rulings.
Nineteen states and the District of Columbia have passed legislation designed to protect abortion access. These laws are designed not only to protect residents of the state and doctors who practice in the state, but also provide some legal cover to women who cross state lines to terminate pregnancies.
Earlier in the year, 88 prosecutors — mostly district attorneys and state attorney generals — signed a statement vowing not to prosecute abortion-related crimes. These prosecutors represent approximately 91.5 million people in 30 states. In response, lawmakers in Texas and Georgia have introduced bills that would ban district attorneys from having a policy of not enforcing prosecution of a particular offense.
We are starting to see other impacts as well. Medical residents typically get their residency assignments in May. There are declines in the number of students seeking residencies in OB/GYN specialties. Additionally, some residents are altering their plans of where to complete their training and where they will ultimately practice.
What Employers Need to Do
- Understand the complexities of the current labor market (it’s not easy) and recognize that recruiting and retaining top talent will continue to present challenges.
- Educate leaders, managers and supervisors about compensation policies and procedures and hold them accountable for appropriate communication with employees.
- Conduct (at minimum) an annual review of current pay levels to ensure compliance with applicable laws regarding pay transparency and pay equity.
- Consider what short- and long-term actions you may need to take to attract and retain women in your workforce.