- The first six months of 2022 were an extraordinary period for the US labor market.
- Unemployment neared 50-year lows, job creation boomed, and the labor shortage eased up.
- Here's where the job market stands as the recovery moves into the second half of 2022.
- This article is part Talent Insider, a series containing expert advice to help small business owners tackle a range of hiring challenges.
The first half of 2022 was a historic one for the US labor market.
Few other periods have seen the economy add so many jobs in such a short span. Employment boomed through the first six months of the year as overwhelming demand for workers extended into 2022. Wages surged higher, only to be beaten by breakneck inflation. And the labor shortage persisted, intensifying concerns that millions of Americans might stick to the workforce's sidelines.
The recovery, while superlative, isn't finished just yet. Measures including labor force participation — the share of Americans either working or actively seeking work — and the Black unemployment rate, for example, remain shy of their pre-crisis levels.
Headwinds are growing more intense. The Federal Reserve is poised to keep raising interest rates through the year, making businesses' debt more expensive and prompting firms to slow their hiring plans. The broad economy is also growing at a slower pace than in 2021, further hampering labor demand as firms look to protect profits.
Yet there's still plenty to celebrate as the labor market recovery pushes into the second half of the year. The economy continues to add jobs at an extraordinary clip and wages are still on the rise. The US economy isn't at maximum employment yet, but it's still making strides in the right direction.
The country is back to record employment
One of the top measures of the labor market's overall health is already back to its pre-pandemic level. Nonfarm payrolls surpassed the February 2020 high in July, bringing the economy to a record-high employment count of roughly 153 million jobs.
The labor market ended the first half of the year less than 500,000 payrolls shy of the pre-crisis record and was still adding jobs at roughly twice the pace seen before the pandemic struck in early 2020. July's blockbuster payrolls report pushed the total count over the line and suggested there are still plenty of gains to be made as the economy makes up for more than two years of lost job creation.
The unemployment rate, meanwhile, hovered at 3.6% through much of the first half of the year, just 0.1 percentage point above the pre-pandemic level. It wasn't until July that the headline rate returned to the five-decade low.
The rate is somewhat skewed by the fact that it only counts participating workers, or those either working or looking for jobs. As such, the millions of Americans still on the labor market's sidelines aren't counted. That's helped pull the unemployment rate to historic lows at a rapid pace.
Still, the rate's quick descent caps a V-shaped rebound for the labor market, especially considering the record-breaking jump in unemployment seen at the start of the US lockdowns.
Wages are growing fast, but still outpaced by inflation
Americans aren't just finding work fast; they're winning huge raises month after month.
Average hourly earnings were up 5.2% in the year through June, about 2 percentage points above the pre-pandemic pace. It's also only slightly slower than the pace seen earlier in 2022, signaling wage growth will take a while to fully return to its previous norm.
Workers aren't likely to feel much of a benefit, however. Soaring prices have steadily chipped away at Americans' buying power for roughly two years. Inflation-adjusted hourly earnings, or "real" wages, are now down from pre-pandemic levels, fully erasing the surge seen through the first months of the pandemic.
There's some hope the trend reverses itself again. Real hourly earnings rebounded slightly in July, aided by tumbling gas prices and still-strong wage gains. Though it'll take several more months for wages to restore Americans' inflation-adjusted incomes, inflation seems to be finally slowing down.
The labor shortage is showing its first signs of cooling
Worker demand, meanwhile, has also started to wane, but is still much higher than before the pandemic.
Job openings fell to 10.7 million in June from 11.3 million, according to the government's Job Openings and Labor Turnover Survey, or JOLTS, report. The decline was the largest since the start of the pandemic and pulled total openings to the lowest sum since September.
A few factors pulled openings from recent record highs. Companies are reining in their hiring plans in the wake of slower growth and rising interest rates. That's likely to erase some of the openings, particularly in the wake of the rehiring boom. Steady hiring through June likely took some openings off the table, too, as available workers matched up with job listings.
The sizable one-month drop signals the supply-demand imbalance in the labor market is starting to close. There are still only 0.6 available workers for every opening, meaning there's a way to go before the two are in equilibrium. But as hiring slows and the economy settles into a new normal, the June JOLTS data suggests the most intense phase of the labor shortage is behind the US.
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