Cooler labor market means bigger paychecks are harder to get

If you talk to American workers today, they’ll probably tell you they’re happy to be employed — but not about much else.

The US economy, which defied economists’ expectations for a recession in 2023, is expected to hold up well again this year, and so does the job market. Americans will probably be spared from mass layoffs that have defined past downturns. But they’ll face dwindling options to change positions, many will hold multiple jobs to make a decent living, and a rising number of college graduates looking for lucrative careers will struggle to find what they want.

A gradual cooling of demand for workers is the best-case scenario for Federal Reserve officials who are hoping to slow down the economy without crashing it: “It’s still a good labor market for wages and for finding a job, but it’s getting back into balance, and that’s what we want to see,” Fed Chair Jerome Powell told reporters after the central bank’s policy meeting Wednesday. 

For many, “getting back into balance” means fewer opportunities to get a better job, or at least a raise.

“People hear that wages are going up, people hear that it's really easy to get a job, and yet that's not what they're finding — themselves, their children, their neighbors,” said Jane Oates, a former Labor Department official who's now a senior policy adviser at the workforce development nonprofit WorkingNation.

This year’s first real check on the labor market will come Friday when the government releases the January jobs report. Economists see the unemployment rate ticking up — although remaining low by historical standards —  and revisions to past data could also change the picture of payroll growth last year.

Looking ahead at 2024, here’s what’s in store in the labor market:

WHITE-COLLAR JOBS ARE FLATLINING

The job market is getting tougher for Americans with a bachelor's degree and higher — a proxy for white-collar workers. The number of jobs in industries with above-average wages has flatlined during the past year, Bloomberg calculations show. Payrolls in those sectors — which include tech, financial activities and professional and business services — peaked last May.

Bryan Foat, 58, of Huntington Beach, California, thought he’d be choosing between two good-paying software sales positions he was interviewing for when he moved back to the US from Argentina in June 2022.

But he lost one job to a candidate who was better qualified, and the other position was put on hold and then eliminated. After previously seeing 50 to 75 applications for available jobs on LinkedIn, he’s now seeing between 500 and 1,500 as workers are chasing fewer available jobs.

“It’s a waste of time to even apply, even if I’m the ideal candidate,” Foat said. “Everything’s just kind of slowing down.”

Foat said he recently pivoted in his job search from what he called a “sharpshooter” approach seeking only specific positions in his field to a “shotgun” process of applying to smaller firms in different industries.

WORKING MULTIPLE JOBS

A record number of Americans worked more than one job last year, and multiple-job holders as a percentage of the total workforce recently matched the highest share since 2019. That was largely driven by women, who worked multiple jobs at the highest rate since the 1990s in December.

Taking on another job isn’t necessarily a sign of financial hardship, especially in this post-pandemic economy where many positions remain open and remote work offers flexibility. Still, almost 40% of Americans in a survey by Harris Poll for Bloomberg News in December said their household recently relied on additional income to make ends meet. Of those, 38% said the extra money barely covered their monthly expenses with nothing leftover, and 23% said it wasn’t enough to pay their bills.

Diane Spadola of Avon Lake in Ohio was able to work full-time as a professional face painter before the pandemic, but since then she’s had to take part-time work as a circulation assistant at her local library, an usher at Cleveland Guardians baseball games, and even occasionally at her friends’ pet-sitting business to generate enough income. 

Spadola said she’d like to work exclusively as a face painter at her Bella Faccia Painting business, but fewer people and companies seem to have the disposable income to hire her for their private parties and events. 

“As the economy goes, so do my clients,” said Spadola, 65. “With the pandemic, with a bad economy, with horrible winter weather, I have to go looking elsewhere to invest in the business that I love.”

STAYING PUT

The number of Americans who voluntarily quit their jobs fell to the lowest level in nearly three years in December. A labor leverage ratio developed by ex-senior White House economist Aaron Sojourner, which compares the level of quits to layoffs, has also been trending down, and employer-review site Glassdoor found that US workers are more downbeat about the prospects for their employers than at any time in nearly a decade.

As workers increasingly think twice about leaving their current position, some are also taking jobs that don’t fully match their skills for the sake of being employed.

Jakob Massey, 26, of Wilmington, Delaware, is working as a tax preparer at H&R Block but has been trying to land a job as a business analyst after graduating with a degree in economics in 2021 and getting a professional certificate in Google Project Management. Massey also previously did contract work for JPMorgan Chase & Co. and worked as a mechanic while applying for positions in his preferred field to pay his bills, including a mortgage. 

“It’s hard to find employment going up against these other experienced individuals who just have more time under their belts,” he said.

LONGER JOB SEARCHES

Among those who lost their job, it’s getting harder to find a new one. It currently takes an average of 22 weeks for unemployed workers to find a new job, the longest since August 2022. The number of people receiving recurring unemployment benefits ended the year 12% higher than at the start of 2023.

Yvonne Smythe, 52, of New York, said she’s sleeping on her daughter’s couch in New Jersey and babysitting her three grandchildren as she looks for a job after her contract work as a project management analyst ended last March. It’s taking her longer than she hoped to find a new job as she sees companies firing workers and restructuring, she said.

Smythe said her unemployment benefits recently ended but she’s “optimistically pessimistic” that she’ll find a job in her field — but not for another month or two. In the meantime, she said she’s annoyed by the glowing reports about the US job market.

“Alot of times with all of these reports, they tend to make people feel invisible, not seen, not heard and unimportant because everyone claps for the data,” she said.