This is the only part of the labor market where workers have less bargaining power

Friday’s employment report showed surprising strength in the job market, but there are signs it may not be all right for all workers.

Resignations in low-wage industries like retail, leisure and hospitality are slowing, said Nick Bunker, an economist at Indeed Hiring Lab.

That means people working in those industries likely have less bargaining power than before, he told MarketWatch.

Here’s why: People leaving jobs are an indicator of the confidence of job seekers that they can go out and find a new job. Churn rates can also predict what will happen to wage growth in the coming months.

“A high dropout rate means there are more workers than usual expressing their wishes by leaving their old jobs. The vast majority of them are going to new jobs, ”Bunker said.

To be sure, the dropout rate is still higher than pre-pandemic rates and people are still switching jobs for higher pay, Bunker said, but the cooling trend is pretty clear, especially in the retail trade.

The churn rate in the leisure, hospitality and retail sectors peaked in late 2021 and early 2022 and began to decline at the beginning of the year, according to an analysis by Indeed based on data from the Bureau of Labor Statistics.

The U.S. job market in July was strong, adding 528,000 new jobs, which came as a surprise among layoffs in the tech sector and elsewhere. Economists expected nearly 300,000 new jobs. The unemployment rate also dropped to 3.5% from 3.6% a month ago, according to data from the Bureau of Labor Statistics released Friday.

Economists have argued that the labor market is among the strongest in the past 50 years.

But there were mixed signals in the data. For example, a slowdown in wage increases for low-wage industries Keep onsince July, Bunker pointed out. Since early 2021, average hourly wage growth for lower-wage production workers had been higher than middle-wage and higher-wage workers, but has declined since the beginning of this year. It was 13% in December and dropped to about 6.2% in June, according to Indeed’s analysis.

The number of people who quit their jobs in June dropped slightly to 4.23 million, according to the latest figures from the Department of Labor. A year ago, the number of resignations reached 4 million for the first time, a trend that some dubbed “the great resignation” and others called the “great renegotiation”. The pre-pandemic exit level averaged around 3 million each month.

Retail, restaurant and hospitality workers have led the trend to quit their jobs. Most of the resignations that emerged in the spring of 2021 took place in those sectors. Demand for jobs in those industries exploded as people dined out and visited stores in the wake of vaccinations and the reopening of the economy.

Quitting can pay off. According to a Pew survey, around 60% of workers who changed jobs from April 2021 to March 2022 reported seeing an increase in their earnings.

About half of those who changed jobs were earning around 10% more than a year ago after wages were adjusted for inflation, making them among the select number of workers whose wages exceeded inflation.

The rise in the cost of living reached 9.1% in June from last year and as a result many Americans are struggling to cover their daily living expenses. Some have invested in their savings to manage costs, while others have changed their spending habits or turned to credit cards. The Federal Reserve has raised the federal funds rate four times since March in an effort to tame the 41-year high inflation.

Economists have noted that the impacts of inflation, coupled with interest rate hikes, could impact consumer spending.

Retailers are already feeling the problem, with Walmart WMT,
+ 0.80%
launching a warning about lower-than-expected profits and a few others who reported losses in the last quarter from inflation and rising spending.

If the economy were to decline, the current high demand for workers in warehouses, retail and restaurants could protect those workers from job loss, William Lee, chief economist at Milken, recently told MarketWatch. Institute. But entry-level white-collar workers could see layoffs, he said, as companies reshape their business models.

The big question right now, Bunker told MarketWatch, is how companies will respond to growing consumer demand. Employers could cut back on their hiring plans or let people go.

Although layoffs are common during times of recession, he said, as the labor market is strained at the moment and employers have had a hard time hiring in the last year or so, employers may consider “eliminating this decline in employment. question “and hold off the workers they have. This is called “job hoarding,” she said.

“If that were to happen, it would give an indication that perhaps we would see less impact on lower wages than we have seen in the past, especially if there are sectors that are understaffed right now,” Bunker said.

Earlier this week, Walmart announced it would lay off 200 corporate employees to restructure the business.

Jimmy Carter, a Walmart spokesperson, told MarketWatch in an email that the move is one of many the company is making to upgrade its facility and provide better service to its customers and the wider business community. . He said Walmart is further investing in key growth areas such as e-commerce, supply chain, technology, health and wellness, advertising and sales.

“It is also an important context that, as customers continue to evolve, we evolve to make sure we serve them,” he wrote.

Walmart’s job cuts provide a glimpse of the pressures the retailer faces right now, but they don’t necessarily signal hardship for the entire economy, Bunker said, noting that “the vast majority of Walmart employees are the people who they work in physical retail stores. ” He said it would be a more worrying sign for the entire economy if Walmart were firing store employees.

“If Walmart said, ‘We are starting to let store employees go,’ it would be a sign that they are starting to think, ‘OK, the demand to come to our stores and buy items is decreasing so much that we need to let people go. . ‘ But that’s not what we saw in the announcement, “Bunker said.

.

Leave a Reply

%d bloggers like this: