About the data
The latest U.S. Bureau of Labor Statistics (BLS) data was released last week. This included the JOLTS (Job Openings and Labor Turnover Summary) data and The Employment Situation report. The JOLTS data is current through November (preliminary), while the employment data is for December 2023 (preliminary).
The U.S. labor market overall (due in part to the efforts by the Fed to cool the economy and curb inflation) has softened somewhat over the past 18 months—“somewhat” is the critical word."
While there is a reported decrease in the demand for labor, last Friday’s job and wage growth numbers came in stronger than expected:
- The U.S. economy added 216,000 jobs in December, above the consensus of estimates of 160,000. On the other hand, the numbers for both November and October were revised lower than initially reported, so these latest numbers overall are not as strong as some initially reported.
- The unemployment rate was 3.7%, the same as the previous month, and below estimates of 3.8%. Interestingly, this is hardly changed from a year ago when the rate was 3.5%.
- Average hourly wages rose 4.1% on an annual basis, which was above estimates of 3.9%, though still catching up to months of high inflation.
In addition to those numbers, the data from the JOLTS report earlier last week is mixed—again providing evidence that the labor market has softened—but only slightly.
By historical standards, is it enough for HR and business leaders to take the foot off the pedal when it comes to the war for talent? No.
So, what does this mean for HR leaders’ priorities in 2024 regarding talent sourcing, attrition and retention, upskilling/reskilling, and more? Beyond the unemployment and wage numbers, it is worth digging a little deeper into the JOLTS data to understand what’s happening and why.
What does the latest data say?
Overall, while the numbers reported last week continue to be off the peaks from late 2021/early 2022, some of them remain at historically moderate-to-high levels. Let’s look at four components: job openings, hiring, quit rate, and layoffs. (Charts Source: US Bureau of Labor Statistics)
The job openings rate normalizes the raw number of job openings relative to the size of U.S. population. While there is clearly now a nearly two-year trend downward, that is coming off a very high peak in March 2022. The current rate of job openings remains well above any monthly rate for 2019, the year prior to the pandemic—but also any month in the history of his data series going back to 2001.
In raw numbers this means that in November 2023 in the U.S., there remain over 1.4 million more job openings than any month from 2001 to 2020. That is a lot of open spots for organizations to compete for top talent. Yes, the ratio of job openings to the unemployed has recently held steady at 1.4 to 1—down from a pandemic peak of 2 to 1. But that still is a significant gap, and demographic considerations (e.g., boomer retirements, declining birth rate, etc.) are important factors in that dynamic.
When it comes to the hiring rate in the U.S., the last six months of 2023 averaged lower than the monthly rate in 2019. And although the November figure is preliminary, if it holds it will have been the lowest hiring rate since the summer of 2014 (excluding March and April of 2020 for obvious reasons.)
As Axios reported in mid-December, “If you strip out health care, education, leisure and hospitality, there's been job loss in the private sector. Over the last six months, outside of those three categories, the private sector registered a decline of 7,000 in payroll employment, per an analysis from Deutsche Bank.”
Many job seekers have felt this slowdown, with interview processes often being drawn out longer than normal, recruiters and applicant tracking systems communicating updates less frequently, and other painful tales from those looking for work.
In fact, Revelio Labs reported in late-October on the increasing phenomenon of recruiter “ghosting” applicants—meaning going silent and not following-up even after getting several steps into the process. Their research found that the hires-to-job-posting ratio dropped from around 0.75 in 2018 to a little under 0.50 in 2023, with most of that decrease coming in the past three years.
With ongoing, if ambiguous, fears of a recession in 2024, and this year’s likely domestic and international political turmoil, no doubt many organizations are slow-playing their hiring plans as they play wait-and-see regarding the overall economy, demand in their particular sector, etc.
Like the job openings and hiring rates, the trend for employees quitting has been choppy, but clearly downward over the past two years. Again, there was a historically high peak in late 2021 / early 2022 – remember the days of The Great Resignation and so-called quiet quitting? Both of those phenomena indicated a sort of confidence and strength in the perceptions of employees. But coupled with the slower hiring by employers, most employees today aren’t feeling nearly as confident as two years ago, so fewer are quitting to start their own businesses or to see if the grass is greener elsewhere.
And yet the monthly quit rates of the second half of 2023 are similar to those of 2019, which were themselves the highest the U.S. economy had seen in nearly 20 years. So historically speaking, employees remain at least somewhat willing to move on for new opportunities, meaning employers need to stay focused on doing everything they can to retain their top talent—more on this in a moment.
Layoffs and discharges
While 2023 saw plenty of high profile, headline-grabbing layoffs—from the tech sector and elsewhere such as Hasbro, EY, and Spotify—overall the layoff and discharge rate remained remarkably stable throughout the year. And it remains well below 2019 and every year going back to 2001.
This isn’t surprising upon reflection, because while layoffs are painful for the individuals affected, when you dig a bit deeper on the biggest announcements of 2023, the numbers were not usually huge percentages of the companies’ total workforces. In many cases these changes amounted to right sizing after exuberant hiring in 2021 and early 2022, to better align with the economic realities of high inflation, higher interest rates, and a slowing economy.
What do these numbers mean for HR Leaders’s 2024 priorities?
These latest numbers and trends overall indicate some amount of softening of the US labor market overall as we enter 2024, particularly in some sectors and job categories. But it is a softening from a very tight market 18 months ago, and there is enough uncertainty and ambiguity both in the current data and what to expect going forward, that HR leaders must stay laser-focused on culture, trust, the employee value proposition (EVP), and other key drivers of employee experience, attraction, and retention.
The labor market was part of the context when the Institute for Corporate Productivity (i4cp) recently surveyed over 120 members of executive Boards, which include Chief Human Resources Officers, Chief Learning and Talent Officers, Chief Diversity Officers, and heads of Talent Acquisition, Total Rewards, and People Analytics. These boards are i4cp’s exclusive peer groups of senior executives who collaborate to explore next practices, build evidence-based solutions to critical talent challenges, and drive their respective functions into the future.
The members of each i4cp board are polled annually about their top four priorities for the coming year, as well as predictions for their respective functions. All of this wisdom and more is available in i4cp’s 2024 Priorities and Predictions report.
Several of these HR leaders’ top priorities are particularly affected by or relevant to the state of U.S. labor market. Consider the following:
- Generative AI—not surprisingly, the consensus of several of the boards is that generative AI is a priority for their organizations in 2024, with CHRO Board members noting that HR must lead organizational initiatives to uncover where AI can increase workforce efficiency and effectiveness. In roles and industries in which labor remains the tightest, the urgency will be highest to deconstruct jobs to the task level and determine where AI and other automation technologies can be leveraged.
Two of the 2024 priorities cited by members of the People Analytics Leaders Board are also AI-related and are critical in an environment of ambiguous labor market signals: enabling AI to connect data across business functions and platforms to provide better workforce insights; and applying predictive modeling using generative AI to assist in workforce planning.
- Culture—Members of i4cp’s CHRO Board also said that organizational culture is a top-four priority for 2024, recognizing that even in a softening labor market, culture is a critical lever for both talent attraction and retention. This is especially true for top talent who know they have many options available. If your organization hasn’t assessed and renovated its culture recently, i4cp has a wealth of resources available to provide a blueprint for the process.
- Inclusion, psychological safety, and trust—on a related point, two of the top 2024 priorities of the diversity, equity and inclusion leaders on i4cp’s CDO Board are more specific on key elements of culture: fostering inclusion for all, starting with emphasis and ongoing education on inclusive leadership; and building more inclusive and collaborative cultures by ensuring psychological safety throughout the employee experience. Focusing on these priorities will be one way that employees will generate an increased level of trust in their organization and its leaders—something the CHRO Board’s comments also emphasized is critical for 2024.
- Skills—The top priority in 2024 for members of i4cp’s CLTO Board is using a more skills-centric methodology to better enable talent processes, from identification and selection of candidates to prescription of learning interventions and performance assessments. Similarly, a top 2024 priority of members of i4cp’s Talent Acquisition Board is aligning to skills-based recruitment and development.
Pivoting to more skills-centric talent processes has been a trend in HR for the past several years, and has included an emphasis on increasing internal mobility. Many organizations have established internal talent marketplaces that use AI to match jobs, gigs, projects, and even mentors with employees based on their skills and aspirations. Organizations that continue to focus on skills will be best able to weather the ebbs and flows of the changing, but still historically tight, U.S. labor market.
- Employee value proposition—another key priority among members of the Talent Acquisition Board in 2024 is increasing collaboration in their respective organizations with talent leaders and HR business to enhance employer brand and strengthen connections between employee value proposition and employee experience. Continued focus on multi-faceted flexibility, culture, and the overall total rewards of employment will be critical for organizations to maintain or improve their talent attraction and retention rates in the current labor environment.
A key element of EVP is of course compensation—the focus of two of the top 2024 priorities among members of i4cp’s Total Rewards Leader Board—improving pay equity and transparency across roles, and aligning compensation with evolving organizational priorities. These are vital, especially given the high inflation rates of the past few years. Using the BLS’s CPI Inflation Calculator (which some commenters believe is conservative in its estimates), if an individual employee’s compensation hasn’t increased by 20% over the past four years (November 2019 through November 2023), their buying power has actually decreased. Has your organization given all your employees a cumulative 20% raise since late 2019?
For many more HR leaders’ priorities and predictions for 2024, see i4cp’s 2024 Priorities and Predictions report.