Despite an unemployment rate of just 3.6% last month, The Labor Department’s Jobs report of Friday, July 7reported seasonally adjusted 209,000 jobs in June, down from May’s gain of 306,000 jobs and fewer than the 240,000 jobs economists had expected.
Although the decline is cooling down somewhat, the labor market remains strong and wage pressures are unlikely to abate. This means that inflation is unlikely to ease, which could lead to another rate hike by the Federal Reserve by the end of July. On June 13, after the meeting of the Federal Reserve’s Federal Open Market Committee (FOMC), Chairman Jerome Powell said that nearly all committee members of the Fed’s main monetary policy body believe it is likely that some further rate increases will be in order this year to bring inflation back to the target rate of 2%.
The Labor Department reported on July 6, a seasonally adjusted 9.8 million unfilled jobs in the US on the last day of May. Demand for “high-touch workers” in service industries such as restaurants, hotels, cruise lines, nail salons, etc. remains high, and small business owners still looking for workers are likely to pay more to get them, despite concerns about the risk of a recession. At the same time, the Federal Reserve has given little indication that rate hikes will stop. Although we received a postponement in June, the possibility of two more increases before the end of 2023 is looming.
Consumer demand seems to have originated from buying goods, including cars and computers. Now we are seeing the results of pent-up demand in the services sector. The turnaround in the travel industry is obvious. Lines are long at the airports, the dollar is strong, encouraging international travel, and the State Department announced this week that it has been inundated with 500,000 applications per week and that 2023 could eclipse last year’s record of 22 million passports issued. It seems you can’t watch an hour of television without seeing advertisements for foreign and domestic tourist destinations, resorts and cruise ships.
In late February, the National Restaurant Association released her 2023 State of the Restaurant Industry Reportresearch on the main factors influencing the almost $1 trillion industry including the economy, workforce, and food and menu trends to forecast sales for the coming year. The report is an authoritative look at the industry and its opportunities based on a series of national surveys of restaurant owners, operators, chefs and consumers.
The association predicts sales will reach $997 billion by 2023, driven in part by higher menu prices, due to significantly increased food and labor costs. The food service workforce is expected to grow by 500,000 jobs, for a total employment of 15.5 million by the end of the year. Meanwhile, in the post-pandemic economy, restaurant owners have begun to understand the “new normal” of current economic conditions.
“The restaurant and food service industries fuel the US economy. Our hiring rate and wage growth are faster than the private sector overall,” said Michelle Korsmo, president and CEO of the National Restaurant Association.
In addition, the healthcare sector added 41,100 jobs, bringing the sector’s total workforce to 16.8 million. As members of the baby boom generation age, companies involved in health care, physical therapy, senior living communities and home care struggle to find employees. This, of course, means that companies must offer higher wages to compete with rivals in the industry and the supply for lower-skilled workers in other sectors. Labor now has the advantage and small business owners are under pressure.
It’s not just low-level positions that are difficult and expensive to fill. HR experts say C-level and top-level managers are hard to come by and larger small businesses (companies with up to 500 employees) have to pay more for top talent.
“Companies will go to the mat to get top talent,” said Davonne Helmer, co-head of the HR Officers Practice at the global talent consultancy. ZRG. “Some companies are not out of the compensation range, but we are in a very different market now. They had to compromise on who they got.”
We live in an erratic and evolving economy. In many ways, Americans have returned to pre-pandemic standards in grooming, spas, and other “affordable luxuries.” This is a positive development. Revenues are rising, but so are costs. Persistent inflation and the high cost of capital (due to interest rate hikes) are putting small business owners under financial pressure.