US Adds 223,000 Jobs in December – How Will This Affect Hiring?

The December job report hosted by the U.S. Bureau of Labor Statistics proved that the labor market continues to soften, ultimately beating projections. In the month of December, the country’s economy added over 223,000 hiring jobs nationwide. While lower than the 256,000 job gain in November, the increase still shows that resilience following the power-shifting pandemic holds true, capping off the 24th straight month of job increases.

Consequently, the increase in hiring jobs connects directly to lowering unemployment rates. The report also noted that unemployment rates fell to  3.5%, 0.2 percentage points below the expectation.

As a staffing agency, we have high stakes in the matter. If the job market is expanding past its pandemic shortcomings, we must be ready for an influx of recruiting companies. Right? If there are more jobs, then finding and hiring fantastic employees must be becoming more complex.

Unfortunately, the country’s economy isn’t as simple as an A-to-B consequence chart. Cause and effect are not as direct in correlation as a logic chart. So, how will new jobs hiring affect staffing in 2023?

It Wasn’t All Firing

Just last month we delved into the topic of Layoff Contagion.

To summarize: over 964 tech companies laid off over 149,876 workers globally in 2022. This mass firing was seemingly caused by an offshoot of mass hysteria. When larger tech companies like Elon Musk’s newly-acquired Twitter start having large employee dumps, other companies follow suit. It’s the psychological concept of believing that the competitor is onto something you aren’t. Meanwhile, that competitor believes another competitor is onto something they’re not.

A chain of dominos falling. Leaders believing they need to fire the majority of their staff to keep up with the trend of larger, more successful companies.

Though social contagion may be to blame, there are more economic factors at play. After the pandemic scorched the working world, companies were scrambling to hire great talent. More powerful companies won the race, being able to offer employees more benefits and higher salaries. This caused companies to hire too many workers. Now, they are feeling the repercussions of the influx and are firing to get back under caps.

The aforementioned tech sector, as well as advertising, media, finance, and professional services all saw major layoffs toward the end of last year.

Smaller Companies Are Winning

When large companies are making colossal employment cuts, small and medium-sized companies are able to amass greater and more significant workforces. Therefore, those smaller employers are now adding jobs and hiring at a higher rate than before.

ADP’s latest survey of private payrolls found that large employers cut 151,000 jobs in December, while firms with fewer than 500 employees added nearly 400,000 new jobs that month.

Those less significant companies are able to pick up the layoffs of the juggernauts. Those that have been cut from their jobs are quickly finding replacement careers, even if the payment is lower. In the current economy, there isn’t much of an option.

The December jobs report showed that the most significant gains were in leisure and hospitality (rising by 67,000). Food services, drinking establishments, amusements, and gambling all say big gains.

Ultimately, this is due to consumers moving toward in-person services, something that had become a rarity during the pandemic phase. Now people want to go out and experience life, raising the need for employment in the sectors.

Georgia diner owner, Ronda Sherwood, told the Washington Post, “When the economy is great, it’s very hard to staff restaurants and lower-wage jobs,” she said. “But when the economy is getting worse and companies do start laying off, that’s when we’re able to staff better-quality people.”

So… How Does This Affect Staffing?

It’s fairly simple: if you are a smaller company, you probably added to the 223,000 hiring jobs in December.

While jobs increase, staffing gets harder. There is more competition in vetting and convincing employees, especially after the Great Resignation. Employees still have the upper hand in negotiations and, with the raise in open jobs, will continue to have it. They can afford to turn down a job for not meeting their needs with so many waiting in the wing. Henceforth, finding great employees is still a competition.

Though your company may not have to compete with larger businesses, you still have to compete with countless other small companies. Therefore, staffing still remains a challenge.

If you are in an industry that has seen an uptick in open positions, your stance becomes more difficult. The employees have more choices, making vetting a more serious situation. While you may not have to pay as high as you did before, you still have to meet the needs of the candidates.

Therefore, it becomes fairly contradicting. Employees can’t ask for high salaries cause the bigger companies have nixed so many positions (and aren’t hiring), but they still have a leg up in negotiations due to the higher chance of landing another job.

At the end of the day, this doesn’t bode well for the future of the job market.

Attracting Employees Is Still Key

Regardless of the increase in the job market, you still have to work to attract the best employees. We’ve gone over these topics countless times. Ultimately, you still have to work hard to find top talent, regardless of your company size.

As a staffing agency, Tier2Tek will continue to remain at the forefront of the shifts, helping companies (like you) find great employees, regardless of the state of the economy. Therefore, if you need any help regarding staffing, reach out to us. We are always here for you.