The job market in the United States has been experiencing wild swings since the COVID-19 pandemic began three years ago. While some of the biggest companies in the country, such as Meta, Amazon, and Microsoft, have announced job cuts over the past few weeks, others are still scrambling to hire workers. In January, U.S.-based employers cut nearly 103,000 jobs, the most since September 2020, according to a report from outplacement firm Challenger, Gray & Christmas. At the same time, employers added 517,000 jobs, almost three times the number analysts had expected.
The tight labor market, particularly in service sectors such as restaurants and hotels that were hit hard earlier in the pandemic, has made it even more challenging to predict the path of the U.S. economy. Despite headwinds like higher interest rates and persistent inflation, consumer spending has remained robust and surprised some economists.
This dynamic is part of the COVID-19 pandemic’s “legacy of weirdness,” according to David Kelly, global chief strategist at J.P. Morgan Asset Management. While many employers have faced challenges in attracting and retaining staff over the past few years, challenges such as workers’ child care needs and competing workplaces that might have better schedules and pay have made it even harder.
With interest rates rising and inflation staying elevated, consumers could pull back spending, sparking job losses or reducing hiring needs in otherwise thriving sectors. Some analysts and economists warn that weakness in some sectors, strains on household budgets, a drawdown on savings, and high interest rates could further fan out job weakness in other sectors, especially if wages do not keep pace with inflation.
For workers in the leisure and hospitality industry, wages rose to $20.78 per hour in January from $19.42 a year earlier, according to the most recent data from the Bureau of Labor Statistics. “There’s a difference between saying the labor market is tight and the labor market is strong,” said Kelly.
While some recent layoffs have come from companies that beefed up staffing over the course of the pandemic when remote work and e-commerce were more central to consumer and company spending, others, such as Boeing, are planning to hire thousands of people this year, many of them in manufacturing and engineering. Airlines and aerospace companies are also rebuilding their workforces after shedding workers during the pandemic. The growth aims to help these companies ramp up output of new aircraft for a rebound in orders with large sales to airlines.
Many companies are finding they have to raise wages to attract and retain workers. Industries that fell out of favor with consumers and other businesses, such as restaurants and aerospace, are rebuilding workforces after shedding workers. Walmart, for example, said it would raise minimum pay for store employees to $14 an hour to attract and retain workers.
Airports and concessionaires have been racing to hire workers in the travel rebound, holding job fairs, and offering staff child-care scholarships to help hiring. Electricians, plumbers, and heating-and-air conditioning technicians, in particular, have been difficult to retain because they can work at other places that aren’t 24/7 and at higher pay.
Many companies’ new workers need to be trained, a time-consuming element for some industries to ramp back up, even if it has gotten easier to attract new hires. The big question now is whether the current labor market dynamic will continue or whether another shift is on the horizon.