LinkedIn Economic Outlook
State of the Labor Market | October 2022
This monthly series includes the commentary on trends we see in LinkedIn’s Economic Graph data, detailing global trends in labor market demand and supply, hiring, separations, turnover and the overall economic climate. Additional information about the Economic Graph can be found at economicgraph.linkedin.com.
The three main takeaways are:
Job markets around the world show signs of cooling down amid higher rates and slower economic growth. Hiring is down in every country we track and more people are jumping back into the labor pool.
In the U.S., the labor market remains a bright spot in an otherwise gloomy environment. Job postings have been edging lower especially in sectors where remote work is more frequently advertised. However, openings are still at a historically high level compared to their pre-pandemic baseline.
We’re still in a job seeker’s market–there is one job vacancy for every active job seeker on LinkedIn. Workers are still quitting their jobs at rates above those seen before the pandemic, with many leaving their positions after being held for less than a year.
Global economic activity is experiencing a broad-based slowdown, with increased risks of a recession in the US, the UK, and the Euro area. A key factor slowing global growth is the ongoing tightening of monetary policy in most major economies in response to soaring inflation. The US economy could tip into a short but mild recession in 2023 as the Federal Reserve raises rates to tame prices and the recession in the Euro area likely will reflect surging energy prices and rationing. Asian cyclical risks look far better, with no signs of a recession in the near term.
Labor markets are cooling down across the globe, but job openings on LinkedIn remain well above their pre-pandemic baseline. The ratio of job openings to active applicants, LinkedIn’s measure of the tightness of the labor market, remains historically high in many countries. Nonetheless, the pace of job growth in North America and Europe has slowed, vacancies have begun to decline in some countries, and the reduction in the unemployment rate appears to have bottomed out or even reversed in some countries.
Hiring has started to slow down globally when compared to one year ago. The largest year-on-year declines in LinkedIn’s Hiring Rate are reported in India (-18.3%), Mexico (-15%), and Brazil (-14.7%). Professional Services contributed to this slowdown, with India (-29%), Mexico (-27%), Brazil (-27%), and Australia (-24%) most affected. Another industry affected was Technology, Information and Media, with Australia (-29%), Brazil (-27%), India (-21%), the United Kingdom (-16%), and the United States (-15%) all showing significant decreases.
The State of the Labor Market in the U.S.
The state of the labor market, through our own lens at LinkedIn, can be understood by looking at the set of indicators shown in the table below. The overall picture is that the labor market is slowly beginning to cool off as the Federal Reserve barrels ahead with its efforts to slow the economy and fight inflation.
The fall in job openings did not happen evenly across industries
Job growth eased slightly in September but remained robust, indicating that the economy was maintaining momentum despite higher interest rates. The plunge in job openings is a result of overall tightening and employers reducing their future hiring plans. Jobs that saw the biggest declines in postings include those in Technology, Real Estate, and Professional Services. The downward trend is likely to continue among these industries and in others that are sensitive to rising inflation, falling stock prices and contractions in other parts of the economy.
Remote job postings have dipped for the fifth straight month, but continue to attract a majority of applications. About 1 in 6 of U.S. paid job postings offered remote work in September 2022, decreasing steadily from a high of 19.8% in March 2022 but still up from 13.2% in August 2021. This share of applications has increased dramatically since the data was tracked starting January 2020 when 2.2% of remote jobs attracted 2.9% of applications.
It’s still a job seekers labor market
The labor market has started to cool down, but conditions are still relatively tight when compared to the pre-pandemic baseline. In the figure below, we plot LinkedIn’s measure of labor market tightness–the ratio of job openings to total active job seekers. This metric differs from the conventional measure of labor market tightness, the V/U ratio, which looks at job openings (V) relative to the number of unemployed workers (U). Our measure captures all available job seekers who are actively applying for jobs (unemployed and employed). According to our measure, job openings relative to active applicants is close to parity. This ratio is considerably lower than the conventional V/U measure, although it is still elevated compared with its historical average.
Additionally, labor supply has not grown as swiftly as demand, but people are returning to the labor market. Job seekers on LinkedIn have increased the intensity of their job search in September– the average number of applications per applicant have increased by 18% year-on-year. Conditions, however, are showing some signs of normalizing, with wider economic weakness starting mid-2022 potentially feeding into softening labor demand.
Along with the fall in job openings, LinkedIn’s hiring rate fell in September by 8.9% compared to August and 12.7% compared to September 2021. The decline reverses the temporary hiring spike which occurred in August, bringing the hiring rate closer to where it was in July. Hiring fell across all industries, but one sector that is still unambiguously contracting is Technology. Hiring in that industry has fallen for 6 months in a row. It’s down 14.7% y/y, and 18.0% since April. Across the 20 cities we track regularly, all have seen hiring decline since April. The ones holding up the best are Miami and Houston. The ones declining sharply over this period are Chicago, Detroit and Cleveland.
Workers are still quitting their jobs at a record rate
Quitting continued to increase for the fourth month in a row, reinforcing the tightness of the labor market. LinkedIn Separation Rate, which measures the rate at which LinkedIn members end their positions, 13.2% Y/Y in September. Notably, total separations, which include both voluntary and involuntary separations, were highest in Hospitals and Health Care, Technology, Information and Media. More workers have been quitting their jobs within a year. The share of positions lasting less than a year nearly reached +10% Y/Y in March 2022, but this growth has slowed in past months to +3.9% Y/Y in September 2022.
Job switching is starting to level off
Employed workers are also finding new work although at a lower rate than the previous year. Growth in US job transitions rate slowed back down to -5.4% Y/Y in September 2022 compared to high rates of +50.9% Y/Y last August 2021. Gen Z, the fastest growing and most diverse segment of the U.S. labor market, continues to lead the way on job changing and moves. However, the rate of job transitions among this cohort is coming back closer to the other generations.
Job seekers voice growing doubts about their companies’ performance
Job seekers’ optimism about their employers’ business outlook dropped significantly in the recent weeks, according to data from the most recent edition of LinkedIn’s Workforce Confidence Survey. Specifically, the survey, conducted between September 10 and September 23, found that 47% of U.S. active job seekers voiced growing concerns about their employers’ performance. A slowing economy, along with persistently high inflation rate, is the most obvious reason behind this decline in confidence. As the graph below shows, that’s the highest level of unease since the survey was introduced in early 2021. Intriguingly, it’s the workforce’s oldest generation, baby boomers (born between 1946 and 1964) that are viewing the current environment most serenely. Only 34% of boomer job seekers report eroding confidence in their employers, according to the Workforce Confidence survey.
The outlook for the U.S. labor market going forward
The labor market remains strong, as can be seen across a variety of measures, from the low unemployment rate to the high quits rate, which illustrates the confidence of workers who are willing to leave their jobs in pursuit of better ones. Labor force participation, as measured by the BLS, remains lower than it was prior to the pandemic, reflecting several factors, including people who left the workforce for early retirement and some remaining parents who stayed home through the pandemic. These are not factors that reverse on a dime.
With still-strong labor demand and sluggish labor supply, the job market remains hot. Workers are moving between jobs more rapidly than in the past, putting upward pressure on wages. In a market with more job openings than workers, the competition to fill vacancies is leading to rapid wage gains now, and the result is that inflation will remain elevated. As growth has slowed this year, supply-demand conditions in the labor market–and the overall economy–seem likely to ease some.
The U.S. labor has been offering plenty of opportunities for workers while presenting some challenges to employers. However, the current situation will undoubtedly change. We will continue to monitor these trends and track others as conditions in the labor market evolve.
|Hiring in the sector is down 14.7% Y/Y in September 2022. This comes against the backdrop of Summer 2021 having been an elevated time for hiring in this sector.
Tech cities surge in migration after declines throughout the pandemic.
|Technology, Information, and Media was the industry with the greatest percentage of paid remote job postings in July 2022 (42.1%) and have been the top industry since August 2020, followed by Professional Services (29.7%), Education (25.4%), and Administrative and Support Services (25.4%).