Market Overview
The Employment Situation: 'The U.S. economy ended 2023 on a high note'
The labor market added 216,000 jobs in the month of December, up from 173,000 the previous month, and a much stronger-than-expected 353,000 jobs in January.
The unemployment rate was 3.7% for the month, flat from the rate seen in November and December.
The number of people quitting their jobs, however, was the lowest in nearly three years.
Sources: Bureau of Labor Statistics, Yahoo Finance, Reuters
Stephen Smith Managing Partner Vaco
“The surge in job additions, particularly in California with a net gain of 23,400 jobs, might seem to contradict the flat national unemployment rate. The fact that the unemployment rate holds steady – even while jobs are added – is attributed to a growing labor force. Anecdotal evidence, like individuals returning from retirement due to unforeseen financial constraints, underscores the nuanced realities behind the statistics.
Consulting trends reflect an expanding workforce, and though the pool of candidates has broadened, the demand for specialized skills, such as IT and DEI audit, persists. The recovery from the pandemic-induced slowdown was robust, and then there was the 2021-2022 surge in hiring and wages that decreased drastically in the last quarter of 2022—and last throughout much of 2023. The stagnant economic forecast has prompted some organizations to suspend full-time hiring. This would understandably drive consulting needs, signifying a shift in hiring strategies as organizations look to stay agile while still getting to business-critical initiatives.
As we navigate this evolving landscape, the emphasis on skills-based hiring becomes paramount. Hiring managers seek efficiency and leverage consultants to streamline processes. The uncertainties surrounding AI is another potential contributing factor impacting full-time hiring, causing companies to rely on consultants until the extent of AI integration becomes clearer. Additionally, outsourcing functions, driven by diminished student interest in traditional fields like accounting, underscores the changing dynamics of skill preferences in today's workforce.”
Market Overview
Staffing Industry Indicator
1. U.S. staffing hours showed small gains week over week in January but have not shown the kind of post-holiday bounce back seen at the same time last year. And they have not regained the levels they were at in the fall of 2023.
2. Overall staffing hours are 17% below the same week last year — this month’s downturn is the largest gap since April 2023.
3. Professional staffing is down 11% year-over-year, close to the 8-10% gap seen much of last year.
4. The year-over-year decline in the Indicator is roughly in line with the decline in temporary help employment as reported in the Bureau of Labor Statistics’ monthly Employment Situation reports.
5. The January 2024 US Jobs Report (published on January 5th) estimates that employment in the temporary help services industry fell by -6.8% in December 2023, on a year-over-year basis; and -1.2% sequentially.
Sarah Cacciabaudo Senior Associate Vaco
“In 2023, we saw a much-needed market correction of the overzealous hiring trends of 2021 and 2022. Last year taught us that there will always be a steady demand for skilled talent regardless of economic trends and we continue to see that as we enter 2024.
To start out the new year, we have seen a notable upswing in activity across all industries. Despite the somewhat subdued volume of hiring being reported, which can be typical for this time of year, the surge is notable given the inherent challenges of Q1. The accounting and finance sectors, particularly pressured in the initial months of the year to meet year-end obligations, have seen staffing make incremental gains amidst intensified day-to-day demands. This modest yet encouraging growth sets a positive tone for the broader outlook in 2024, hinting at resilience and potential expansion, even within the context of seasonal industry pressures.”
Market Overview
Recession Watch 2024
‘We’ve landed softly; we just need to make it to the gate’
Many economists spent early 2023 predicting a painful downturn, a view so widely held that some commentators started to treat it as a given. Instead, the economy grew 3.1% last year, up from less than 1% in 2022 and faster than the average for the five years leading up to the pandemic. Inflation has retreated substantially. Unemployment remains at historic lows, and consumers continue to spend even with Federal Reserve interest rates at a 22-year high.
Source: New York Times
U.S. economy brushes aside recession fearmongering with strong Q4 performance
- The Commerce Department's advance fourth-quarter gross domestic product report showed inflation pressures subsiding further; GDP increased at a 3.3% annualized rate last quarter after advancing at a 4.9% pace in the third quarter.
- Growth was attributed to rising exports, government spending and business investment.
- The strong economic performance, which appears to have spilled over into the new year, suggested that March would be too soon for the U.S. central bank to start cutting interest rates. Rate cuts this year, however, remain in the cards as inflation cools.
- Part of the economy's stamina reflects labor market resilience, marked by low layoffs and strong wage gains, which are underpinning consumer spending. The economy created 2.7 million jobs in 2023.
Source: Reuters
Mike Green Managing Partner Vaco
“At the start of 2024, hiring trends show a shift towards direct hire placement and services, with candidates prioritizing longevity and a balanced focus on flexibility, the opportunity to earn more, and access to ongoing professional development. The forecast indicates a resurgence in demand for both contractors, notably in IT, and full-time, permanent employees—although not all organizations are quick to backfill positions given some of the over hiring that happened in 2021 and 2022.
The notable theme for the start of the new year is thoughtfulness—candidates are being more selective about new career opportunities and organizations are considering a mix of talent solutions, including outsourcing and consultants in addition to traditional, full-time headcount, in order to deliver on critical business objectives while remaining fiscally responsible and nimble.”