Labor Statistics and the Future of the Gig Economy
April saw a job loss of historic proportions in the US. The May jobs report brought a surprise turnaround. What does that mean for the future of work?
If you are a professional looking for the next opportunity, or a company looking for talent, the theme is the same: there is a light on the horizon. But intelligence for navigating the recovery will be at a premium.
Detailed employment data can help companies determine how fast the recovery is going to happen so they can make the most informed decisions about committing to new or returning talent. Workers will need to decide how to adjust their goals to put them in the best position to deliver value and advance their careers.
Both will find compelling reasons to look at flexible work as a potential path to the next normal, adding momentum to the already growing gig economy. Many companies will be looking to engage contingent workers, contractors, and freelancers. Many workers will be taking on those contractor positions.
Recent labor statistics show how we are positioned today, and historical context gives clues to the road ahead.
While the economic impact of COVID-19 is a new experience, there is a rich data set to inform the recovery from recessions in the US.
Just Before COVID-19
In the pre-pandemic economy, employment was strong. The US saw some of the lowest unemployment rates in history, dropping to as low as 3.5 percent. Job openings exceeded people leaving jobs by roughly three million people.
Even as concerns about a possible recession began to arise, the first two months of 2020 saw the fastest job growth since the 2008 recession. This growth spanned all labor categories, from light industrial to IT and professional categories.
Pandemic and Shutdown
The April US jobs report saw a loss of 21 million jobs in the US, erasing the total job gain since the 2008 recession. Unemployment jumped by 14.7 percent, the largest rise in history. But there are some clues to the future. Roughly 80 percent were temporary layoffs. Leisure and hospitality were hit the hardest, accounting for 50 percent of the losses.
The May Jobs Report
Nearly everyone was caught off-guard when the May jobs report came out. Hoping for a slowdown in jobs losses, we instead saw actual gains. More than 2.5 million jobs were added.
The gain is a drop in the bucket compared to 21 million losses in April but an indicator there is life in the economy. The rise spanned nearly every industry except for oil and gas and federal government sectors.
Past Labor Statistics Provide a Telling Indicator of the Road Ahead … with Exceptions
Observers often try to speculate on the recovery in terms of its pace, whether it’s going to be a “V” shape, a “U,” or even a “W.” We took a different look since companies and workers ultimately want to know when the recovery will happen, not its shape.
Past Recovery Patterns
Looking back at 13 recessions since 1945, when such data began to be tracked, we found that the most telling predictor of when a recovery is fully realized is the rate of job gain during the first month after the downturn ends. That’s where we are now.
When 25 percent or more jobs are gained back, we can look at a six- to nine-month path to full recovery. With 10 to 15 percent gains in the first month, we’re looking at nine to 12 months to get back to pre-recession levels. Four to eight percent gains lead to a 13- to 16-month recovery, and zero to two percent indicate nearly three years to the end.
A Timeline for Return
Today, we’re looking at job gains in the 10 to 15 percent range over the first month, and that points to the nine- to 12-month scenario. This figure puts job numbers at pre-recession levels by early to mid-2021 in the US. Of course, this is not certain, but the numbers indicate a very real path forward.
Another more optimistic correlating factor is the percentage of unemployed workers on temporary layoff. Currently, roughly 80 percent fall into that category, and historically any figure over 25 percent would predict a seven- to 10-month recovery. This is more aggressive than we would anticipate, given the uncertainty of unique market conditions today.
Finally, there is the total jobs lost factor. Historically, when more than three million jobs are lost, recovery would take nearly three years (32-35 months). This figure is the basis for many of the more pessimistic predictions.
Given the strength of the economy before the pandemic, the speed at which jobs were lost, the number of job losses deemed temporary and the rapid pace at which jobs are now being added back, this final scenario is unlikely.
In any case, we’re seeing companies begin to seek more workers today, showing an early indication that the early 2021 return to full employment may be the most valid path.
Future Hiring Points to the Importance of Detailed Data
There is no playbook for engaging workers in the wake of a pandemic, but from a workforce strategy perspective, companies can make informed decisions. The trends that preceded COVID-19 have not necessarily gone away; in the likely event that this is a near-term recovery, employers have an opportunity for employers to set themselves up for success in dealing with the labor market difficulties they were having just a few months ago.
The talent shortage will continue in some areas. Many roles that were difficult to fill before the recession, such as those in finance and accounting or IT, will remain challenging. Implications of the federal stimulus package mean that even in lower skilled occupations that have been hit hard, high unemployment does not necessarily translate to worker availability.
The macroeconomic data may compel companies to move forward with engaging workers and advancing their business strategy. That said, in order to be strategic with your go-forward sourcing strategy, knowing the overall national trends is not enough. Those trends do not indicate what may be occurring in a particular skill in a specific location, information critical to informing employers’ decision making in the geographical markets where they operate.
For Smart Contingent Workforce Engagement: Get Local
The good news is that there is data to point out conditions on the ground at a detailed level. For example, AGS hiring data, combined with general employment statistics, provide the basis for reporting on more than 60 metro areas across the US.
This information is available through AGS’ Local Market Analysis reports, which
provide a detailed view into trends in hiring and bill rate pressure for contingent workers with key skills in specific locations. As a resource, they are the tip of the iceberg for companies that engage great talent partners for market intelligence.
By using this Local Market data, employers can understand how their sourcing decisions should vary depending on what they source for and where, and make strategic decisions that put them ahead of their hiring competition as we come out of the COVID-19 crisis.
Moving Forward in the Gig Economy: Visibility is Everything
As organizations progress to a post-pandemic economy, contingent workers will be an important part of the picture, and the ability to find and engage flexible talent will make the difference between struggle and success. The competition for the people to deliver on business goals will remain.
A sharp view into the talent supply and an informed decision on costs will be an advantage for any workforce strategy. The right talent partner can deliver the data to bring that advantage to life.