Job Market May Hold Some Surprises in ‘24

Manufacturers should keep an eye out for the tipping point.


The actions of the Federal Reserve have become hotly speculated economic flashpoints in the past two years as efforts to rein in inflation have fallen on its regimented efforts to slow growth.

And although rate increases have spooked the stock market at times and added challenging uncertainties to business activity, they have also been effective: the most recent federal report on inflation showed a moderate 3.4% increase year-over-year – a slight uptick from November’s 3.1% inflation rate.

The Fed hopes to reach a point where inflation sits around 2% and monthly job gains are at or around 100,000 – with annual wage growth of around 3%. And while a nervous stock market wants everything to happen faster, the recent report isn’t too bad. In fact, Kiplinger recently said that, despite the slight December uptick, “falling inflation appears likely in 2024, with the rate coming down quickly in the next few months.”

So while this movement hasn’t been dramatic, the inflation problem seems to be on its way towards correction and, with it, there are signs that point to some slowing of job growth – a welcome sign for manufacturing businesses who face stubbornly persistent challenges in filling talent gaps.

As usual, however, these things take time, meaning this could make for a year where the first and second half differ widely in terms of how businesses experience those labor implications. Reuters called this related easing of the labor market “elusive” as wage growth remains above 4% and job openings historically high. Many are asking – when can I hire workers with some assurance that they will actually stick around?

There are inklings. A federal jobs report released in December cited mild month-over-month declines in job openings – reaching their lowest level since March of 2021. The Labor Department also added that layoffs were up modestly and quits were down slightly, generally reflecting a decline in confidence on behalf of workers that they might find a better gig elsewhere. The job market has remained resilient even in the face of rate cuts, but it may be showing some signs of cracking.

One way manufacturers may begin to benefit from this is due to the fact, says Reuters, that the ratio of job openings to the number of unemployed jobseekers has also been approaching its pre-pandemic norm.

As manufacturers look to take advantage, they need to consider a few things. For one, it may take a little more time to further even out in a way that scales back the leverage  at least minimally  that job seekers have over employers. Secondly, it may mean that the workplace improvements and hiring incentives you’ve established in recent years might actually work  meaning businesses who maintain their momentum toward becoming an appealing employer should benefit. Julia Pollack, chief economist for ZipRecruiter, recently told Business Insider that "employers are not as aggressively courting new hires,” and while some sectors  like health care  still feature aggressive competition for new hires, other industries are losing a bit of steam.

Manufacturers can find the sweet spot, but they need to be looking for it: 2024 may start with the same challenges they’ve come to expect, but if they’re not watching for these subtle changes, they may miss the opportunity to thread the needle. Because there could be another side right behind it: Skanda Amarnath, executive director of Employ America, recently told Reuters that, with the job market slowing, the Fed should change its focus away from inflation reducing efforts  and toward “the potential downside risks the labor market faces in 2024."

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