Latest Jobs Data Shows Braking Recovery in Labor Market
According to just-released data, the labor market reached an inflection point in July, beginning what many recruiters believe will be a slower jobs recovery phase than had been anticipated earlier in the spring. But new data from Thrive indicates the dust might be settling for search firms heading into the second half of 2020. We’ve got it all, including insights from Brian Cole of MedTech Executive Search.
August 7, 2020 – Employment rose by 1.8 million in July as the U.S. unemployment rate fell to 10.2 percent, according to the most recent U.S. Bureau of Labor Statistics report released this morning. That’s down from a peak of 14.7 percent in April, but still far above the 3.5 percent rate in February before the coronavirus pandemic led to mass economic shutdowns across the country.
These improvements in the labor market reflected the continued resumption of economic activity that had been curtailed due to the coronavirus (COVID-19) pandemic and efforts to contain it. In July, notable job gains occurred in leisure and hospitality, government, retail trade, professional and business services, other services, and healthcare.
“We believe the labor market reached an inflection point in July, starting what will likely be a slower phase of recovery,” said Nomura economist Lewis Alexander said in a note ahead of results. “Stronger-than-expected employment growth in May and June was likely due in part to faster and more widespread re-opening activity. However, that earlier re-opening activity likely contributed to the resurgence in Covid-19 activity across the country, resulting in what we expect will be slower employment growth in July.”
“We have seen a very troubling increase in COVID-19 cases in many states that had reopened for business, but we continue to be cautiously optimistic that the overall U.S. economy has turned a corner, and that the solid job gains announced today will be sustained,” Tony Bedikian, managing director of Citizens Bank, told Fox Business.
In addition, the ADP National Employment Report released Wednesday showed private payrolls rose by a meager 167,000 in July. Consensus economists had expected private employers added back 1.2 million payrolls, after an upwardly revised 4.3 million additions in June.
Where Job Growth Occurred
· Employment in leisure and hospitality increased by 592,000, accounting for about one-third of the gain in total nonfarm employment in July. Employment in food services and drinking places rose by 502,000, following gains of 2.9 million in May and June combined. Despite the gains over the last 3 months, employment in food services and drinking places is down by 2.6 million since February. Over the month, employment also rose in amusements, gambling, and recreation (+100,000).
· Government employment rose by 301,000 in July but is 1.1 million below its February level. Typically, public-sector education employment declines in July (before seasonal adjustment). However, employment declines occurred earlier than usual this year due to the pandemic, resulting in unusually large July increases in local government education (+215,000) and state government education (+30,000) after seasonal adjustment. A July job gain in federal government (+27,000) reflected the hiring of temporary workers for the 2020 Census.
· In July, retail trade added 258,000 jobs. Employment in the industry is 913,000 lower than in February. In July, nearly half of the job gain in retail trade occurred in clothing and clothing accessories stores (+121,000). By contrast, the component of general merchandise stores that includes warehouse clubs and supercenters lost jobs (-64,000).
· Employment in professional and business services increased in July (+170,000) but remains 1.6 million below its February level. The majority of July’s gain occurred in temporary help services (+144,000).
· In July, the other services industry added 149,000 jobs, with most of the increase occurring in personal and laundry services (+119,000). Since February, employment in other services is down by 627,000.
· In July, healthcare added 126,000 jobs, with employment growth in offices of dentists (+45,000), hospitals (+27,000), offices of physicians (+26,000), and home healthcare services (+16,000). Job losses continued in nursing and residential care facilities (-28,000). Employment in healthcare is down by 797,000 since February.
· In July, employment in social assistance increased by 66,000, with child day care services accounting for most of the gain (+45,000). Employment in social assistance is 460,000 lower than in February.
· Employment in transportation and warehousing rose by 38,000 in July, following an increase of 87,000 in June. Despite job gains over the past 2 months, employment in the industry is down by 470,000 since a recent peak in January. In July, employment rose in transit and ground passenger transportation (+20,000), air transportation (+16,000), and couriers and messengers (+9,000).
· Manufacturing employment increased by 26,000 in July. An employment gain in motor vehicles and parts (+39,000) was partially offset by losses in fabricated metal products (-11,000), machinery (-7,000), and computer and electronic products (-6,000). Although manufacturing has added 623,000 jobs over the past 3 months, employment is 740,000 lower than in February.
· Financial activities added 21,000 jobs in July, with most of the gain in real estate and rental and leasing (+15,000). Since February, employment in financial activities is down by 216,000.
· In July, construction employment changed little (+20,000), following job gains of 619,000 in May and June combined. However, employment in the industry remains 444,000 below its February level.
· Mining continued to shed jobs in July (-7,000), reflecting a loss in support activities for mining (-11,000). Mining has lost 127,000 jobs since a recent peak in January 2019, although nearly three-fourths of this decline has occurred since February 2020.
Impact On Executive Search
“The pipeline of average weekly opened searches recovered to above normal levels at the end of June,” said J. Reed Flesher, founder and president of Philadelphia-based Thrive, which develops software for recruiters and talent executives. “If this level of opened searches per week can be sustained at current levels, we could see a full and sustained rebound in the number of completed searches as early as November.”
Seven days after the U.S. declared the COVID-19 crisis a national emergency, Thrive built an executive search dashboard to track the pandemic’s impact on the executive recruiting industry. The firm sourced this data from a subset of leading executive search firms, in-house executive search teams, and VC/PE talent partners. With this data, Thrive has kept close tabs on industry key performance indicators (KPIs) in order to provide real-time data to leaders in executive search that focus on: opened, held, canceled, and completed searches.
Top Search Consultant Weighs In
“Job cuts increased by 54 percent in July as downsizing has continued,” said Brian Cole, managing partner of MedTech Executive Search. “This dynamic environment will continue to evolve as payment protection program funds are spent and other stimulus funds are rolled out. We believe that commodity product companies are at risk and should be exploring opportunities to create and add value. Companies will continue to contain costs while the interim economic uncertainties force businesses to focus on their financial well-being.”
“Challenging times can become an amazing opportunity for companies that strategically navigate it,” Mr. Cole said. “This can be a great time to top-grade your organization. Now, more than ever, companies will need to partner with an executive search firm possessing strong domain experience in order to obtain top talent.”
“We expect hiring to slowly rebound and companies will be much more thoughtful in their limited hiring,” he said. “They should be partnering with a search firm that has relationships with a deep network of professionals within their industry as this will allow them a substantial advantage as the economy stabilizes and improves. Firms that are generalists and spread themselves too thin within multiple industries will have limited success in an interim economy of high unemployment. This will also be a great opportunity for top talent to explore alternative options to advance their career. These professionals are already seeking the leading knowledge brokers in their industry in order to ascertain which companies they should be exploring and why.”
“While the unemployed are actively looking for employment, professionals still working are investing more time listening to new opportunities,” said Mr. Cole. “We believe that many of the unemployed will move into consulting roles. Companies have been forced to adapt to remote work, which will make this transition easier than in the past. With companies paying closer attention to their financials, bringing on consultants allow them the ability to flex up and down quickly.”
Contributed by Scott A. Scanlon, Editor-in-Chief; Dale M. Zupsansky, Managing Editor; and Stephen Sawicki, Managing Editor – Hunt Scanlon Media