That pandemic-driven contraction in the labor pool came on top of a longer-term structural trend toward tighter jobs markets as the huge baby-boom generation retires and leaves the workforce.
Without measures such as sustained immigration, aging populations will shrink workforces in many countries, according to a recent study of labor markets in the US, Canada, France, UK, Germany, Australia, Japan and China by Glassdoor Inc. and Indeed Inc.
That’s pushing some companies and governments to think longer-term.
“We have to make sure we manage through downturns in such a way that we’re in a good place to handle the upturns,” Cynthia M. Sanborn, chief operating officer of Norfolk Southern Corp., told Wall Street analysts on Oct. 26. “So we have levers such as attrition that can help us if we need it, but we also know that we have to be fortified in having a good hiring pipeline or a line-of-sight to that hiring pipeline, so that we can manage the upturn.”
Labor shortages are most acute in some of the industries hardest hit by the pandemic.
Payrolls in the US leisure and hospitality industry are more than one million below where they were prior to the Covid-19 shock. Restaurant staffing is also lower as well.
That’s got economists such as Betsey Stevenson of the University of Michigan thinking that layoffs in those sectors won’t be nearly as large as they have been in past downturns.
White-collar workers may not fare as well — as a string of recent high-profile layoff announcements suggest. Elon Musk made deep cuts at Twitter and Meta Platforms Inc. CEO Mark Zuckerberg is letting 11,000 employees go. Amazon will shed a similar number of staff into 2023, while HP Inc. will eliminate as many as 6,000 roles over the next three years.
All told, the tech industry announced 9,587 job cuts in the US in October, the highest monthly total since November 2020, according to Challenger, Gray & Christmas Inc., a consulting firm.
In banking, a sharp downturn in revenue from dealmaking and debt issuance has put investment bankers on high alert. Goldman Sachs is embarking on its biggest round of layoffs since the start of the pandemic, with plans to eliminate several hundred roles. Citigroup cut dozens of positions in early November, while reductions expected to eventually total about 200 have begun at London-based Barclays, according to people familiar with those moves.
The cuts in tech and finance may be dramatic, but no one is expecting a massive wave of layoffs, as happened in 2008. Tech also represents only about 2% of all employment in the US, according to ADP Research Institute.
What’s more, many of the information technology workers getting pink slips at bigger companies may end up being hired by smaller firms which have had difficulty attracting such talent, according to Tom Gimbel, CEO of Chicago-based employment agency LaSalle Network.
“The great news for small and medium-sized companies is that they don’t have to pay the same outrageous salaries the big companies were paying,” he said.
The pandemic’s aftermath has also made it tougher for companies to hold on to their workers, with employees seemingly more willing than in the past to look for better opportunities elsewhere.
One in five US workers aged 25 to 54 reported actively applying for new positions last month, according to the latest high-frequency data from decision intelligence company Morning Consult.
“There is a great talent reshuffle happening across the world,” LinkedIn Corp. CEO Ryan Roslansky told Bloomberg Television . “People are trying to find new jobs and opportunities and upskill.”
Although Federal Reserve officials appear poised to begin slowing the pace of interest-rate hikes, all bets will be off if inflation persists. That’s especially so if confident workers seek higher wages, fueling price rises. Resulting rate rises from the Fed and other central banks could drive their economies into a deep downturn, and companies would likely resort to big layoffs as their profits dwindled.
But as in the US, jobs are holding up in many economies that have aggressively raised rates. New Zealand’s unemployment rate remains near a record low while wages rose by the most since the series began. Australia has been forced to loosen migration requirements to allow as many as 35,000 more workers to enter the country every year.
“The great ‘re-opening’ has stoked demand for workers in the services sector, above all hospitality, while manufacturers are still scrambling for workers to catch up with their order backlogs,” said Frederic Neumann, chief Asia economist at HSBC Holdings Plc.
“Employers left short of staff over the past year are also likely to be reluctant to trim their payrolls aggressively, fearing that they may struggle to rehire once growth recovers,” Neumann said.
“Labor markets, in other words, may prove far more resilient in this cycle than in the past, leading central bankers little room to turn accommodative once growth begins to wobble.”