A Now Hiring sign is seen at a WholeFoods store in New York City.
Adam Jeffrey | CNBC
Recession-like conditions rolling through the US economy are likely to cause further ripples in an otherwise strong job market.
“Ongoing recessions” have become a popular term these days for what the US has been experiencing since a slowdown in early 2022. The term suggests that while the economy doesn’t fit an official recession definition, there will be sectors that will feel very comfortable as if they are in contraction.
So is the job market, which was strong overall but weakened in sectors that could strengthen this year, according to data from popular networking site LinkedIn.
Indeed, economists there have identified several sectors that will experience varying degrees of stress this year.
“Labour markets remain tighter compared to pre-pandemic levels,” said Rand Ghayad, head of economics and global labor markets at LinkedIn. “They are still resilient. They are still stronger than what we saw in the pre-pandemic era, but they have gradually slowed and will likely slow further over the next few months.”
Various dominoes have already fallen during the rolling recession.
Housing construction has experienced a sharp downturn over the past year, and widely published manufacturing indices have been pointing to a decline for several months. Additionally, the latest survey of Federal Reserve senior loan officers found significantly tighter credit conditions, suggesting a slowdown is hitting the financial sector.
Other sectors may follow as economists broadly anticipate that the US will see slow to moderate growth at best this year.
LinkedIn data, which is derived from job postings and other data from more than 900 million members of the site worldwide, differs significantly from government data in interesting ways.
While the more widely circulated data from the Bureau of Labor Statistics reveals an extremely tight job market, with nearly two open positions for every available worker, LinkedIn’s “job market tightness” metric has shown a 1 to 1 ratio, which even looks a little looser.
The implications are important.
The Federal Reserve has cited historical tightness in the labor market as the motivation for its series of rate hikes aimed at taming inflation. If market trends play out as LinkedIn data indicates, it could provide impetus for the central bank to ease its own tightening measures.
“Everything depends on what the Fed will do in the next few months,” Ghayad said.
Where the jobs will be
For job seekers, the phrase “ongoing recession” means that some industries will find it easier to find employment while others will find it more difficult.
LinkedIn identifies certain industries as weak, which means employers are finding it easier to fill positions and don’t have to use as many lures to find workers. These industries are government administration, education and consumer services, where there are more applicants than vacancies.
Moderately tight markets include technology, entertainment, information and media, professional services, retail real estate, retail and financial services. In these industries, applicants find it easier to find opportunities, while employers need to step up their recruitment efforts.
Extremely tight labor markets include housing, oil and gas, hospices and health care. LinkedIn says that in these areas, “employers can’t fill vacancies fast enough.”
Though hospitality has consistently led the way in expanding payrolls, the industry is still about 5.5 million below its pre-pandemic levels, according to BLS data. That’s true even though hotels, restaurants, bars and the like have all increased hourly wages by about 23%.
“This industry is actually still looking to hire a lot of people. It’s the tightest industry in the United States,” Ghayad said. “There is a great demand. You are looking for people. There are a lot of bottlenecks. You can’t find people, so these industries, services, industries, housing and anything related to food or entertainment are booming.”
Recession fears are spreading
From a business standpoint, Ghayad said there were four industries that were recession-proof: government, utilities, education and consumer services. He does not expect any significant decline in the number of hires there.
Despite the job market’s apparent health, many economists believe a broader recession is yet to come.
A Wall Street Journal recession survey puts the probability of a contraction at about 61%, and the New York Fed’s recession indicator, which uses the spread between 10-year and 3-month Treasury yields as an indicator, points to 57%. Probability of a recession next year. This is the highest level since 1982.
Still, Ghayad said he expected hiring numbers to remain high, although LinkedIn posts mentioning words like “layoffs,” “recession,” and “open to work” have increased in recent months.
“We do not expect any potential downturn to significantly affect labor markets,” he said. “We are in a very good position at the moment. There’s some cooling, but… the job market continues to be the brightest spot in the US economy.”