Author: Andrew Berger-Gross
Welcome to the October 2024 edition of NC Economy Watch: an update on what’s happening in the North Carolina economy and what it means for you, brought to you by the Labor & Economic Analysis Division (LEAD) of the NC Department of Commerce.
In this edition of NC Economy Watch, we take stock of how labor market conditions in North Carolina and nationwide have changed since the height of the COVID-19 pandemic. Over the past two years, hiring new employees has gotten easier while finding a new job has become more difficult. Although the future is uncertain, it’s clear that the COVID-era labor market is now a thing of the past.
Farewell to the COVID-Era Labor Market
Think back to the red-hot labor market of 2022. The economy was booming on the back of rock-bottom interest rates, trillions of dollars of federal government spending, and the widespread lifting of social distancing mandates. Employers were adding to their payrolls at a breakneck pace while struggling to fill open positions. Workers were hopping from job-to-job in pursuit of better pay and working conditions. It was, by many measures, the tightest labor market on record.
We’re in a different world now. As the economy came down from its COVID-era sugar high, the labor market began to normalize, and leverage shifted away from jobseekers and back toward employers. Over the past two years, both nationwide and in North Carolina, the number of job openings has plummeted, and rates of hiring by employers and job-hopping by employees are now well below their pre-COVID levels.
Despite this easing in labor market conditions, most employers are still holding onto the employees they already have on staff. Right now, the labor market is “stuck in neutral”—we’re no longer seeing the growth in job opportunities that typically happens when the economy is expanding, but we’ve yet to see the mass layoffs that typically accompany an economic recession. This is a tough situation for jobseekers, who now encounter the most difficult job-finding environment in years, but it’s relatively advantageous for incumbent workers, who face a relatively low likelihood of losing their job.
A cooling labor market also makes things easier for employers. As the competition for talent has ramped down, employers are now having more success filling open positions. Our biannual Employer Needs Survey revealed that 62% of North Carolina employers attempting to hire within the past year experienced difficulty filling open positions, a marked decline from the 81% who grappled with hiring difficulties in 2021-2022 [Figure 1].
Figure 1
While the current labor market situation is a mixed bag—better for employers and incumbent workers, but worse for jobseekers—some fear that it has the potential to get worse for everyone. Slower hiring has contributed to a rise in unemployment nationwide and in North Carolina [Figure 2], leading many analysts to conclude that our economy might be on the brink of a broader downturn.
Figure 2
Of course, recession fears are nothing new in these uncertain times. As early as 2022, economists have been telling us that a recession is lurking just around the corner. Two years later, the economy is still expanding, employers are still hiring (albeit at a slower pace), and the much-feared recession has yet to rear its ugly head.
These recession fears are understandable. What we’ve seen in recent years—high inflation, rising interest rates, slowing growth, rising unemployment—are usually tell-tale signs of an impending contraction in the economy. And just because we’ve defied the odds so far doesn’t mean that our luck won’t eventually run out. But at the end of the day, debates about whether our economy will slide into a recession can seem academic in nature and fundamentally disconnected from the day-to-day realities faced by North Carolinians.
The facts on the ground are clear: the COVID-era labor market is now a thing of the past. Hiring conditions have improved for employers, but job-finding conditions have deteriorated. Jobseekers may need more assistance with reskilling and job placement to help them secure employment. Most of all, jobseekers deserve compassion and understanding as they adjust to this new reality. Whether or not our economy eventually enters a recession, for many jobseekers around the country, it can feel like a recession is already here.
For inquiries and requests, please contact:
Meihui Bodane, Assistant Secretary for Policy, Research and Strategy
NC Department of Commerce, Labor & Economic Analysis Division (LEAD)