The State of the Talent Market in 2024: Beyond the Headlines and Numbers

The American job market is undergoing a significant transformation.  Major corporations such as Google, Salesforce, Meta, Morgan Stanley, and Nike have announced layoffs in key roles, a trend that started in 2023 and continues into this year. Although the job cuts in 2024 have not reached the same scale as last year, the outlook for the American economy remains bleak.

Despite the optimistic projections in the latest jobs report, the sobering reality is that we are inexorably marching towards an increasingly rigid job market. This trajectory has instilled unease among economists and analysts who are uncertain about what the future holds.

When you dig into the data, four factors suggest the US jobs market isn’t as strong as it seems. Labor force participation, emerging technologies, underemployment, and employee sentiment are key trends shaping the employment outlook.

Cracks Beneath the Surface: Unemployment Numbers Don’t Tell the Whole Story

The seemingly robust labor market might deceive you at first glance. The unemployment rate sits near record lows, a testament to what may seem like a healthy economy. But beneath the surface, cracks are starting to show.

A chart from the BLS showing civilian unemployment rates from 2004 to 2024
Unemployment rate, seasonally adjusted | Source: BLS

A closer look reveals a shrinking workforce. Last December, a staggering 845,000 people dropped out, marking the tenth-largest increase in the number of people dropping out of the labor force since the government started tracking the data in 1975.

Americans dropped out of the labor force 8 out of 12 months last year, leaving the US with 694,000 fewer workers. The number of people dropping out of the labor force is also the reason that the unemployment rate is so low. That sounds strange, but the unemployment rate doesn’t include people who have dropped out of the labor force. It’s calculated by dividing the total number of unemployed people by the total size of the labor force and multiplying by 100.

Anyone not actively looking for a job is counted as out of the labor force. Lately, the people dropping out of the labor force have included more prime-age workers. The prime-age labor force participation rate has fallen consistently since last September.

A chart from BLS showing the declining labor force participation rates since 2004
Labor force participation rate, seasonally adjusted | Source: BLS

The government also overestimated the number of jobs the US added almost every month in 2023. The BLS releases the nonfarm payrolls report each month, which estimates how many jobs were added to American companies. But the report also tells us how many jobs its previous two reports were off by. In a typical year, some months are revised higher, meaning the BLS underestimated how many jobs were added, and some months are revised lower, meaning they overestimated.

Last year, every month except October was revised lower. It was the first time those many months had been revised lower in the survey’s history, dating back to 1979.

And we’ve seen another reliable recession indicator from the jobs report: a decline in real wages and average hours worked. While the average wages for American workers soared in 2021 and 2022 during the Great Resignation, things reversed course in late 2023.

The average weekly earnings per worker fell in December 2023 for the second time in three months when adjusted for inflation. That was primarily the result of a decline in the number of hours the average American worked.

Reducing hours has long been an early recession indicator. It shows businesses are looking to lower their labor costs because they aren’t making money and aren’t yet ready to start handing out layoffs. The rise in jobless claims has also caught the economists’ eyes.

The number of people who continued to file unemployment claims rose to the highest level since 2021, in mid-November and has remained pretty high since then. The numbers have stayed under 2 million, which is low by historical standards. However, the consistent increase in continued employment claims, even as initial claims for unemployment insurance have been very low, is unusual. It shows that people are having trouble finding jobs once they’re laid off, and that’s a sign that the labor market may not be so great for job seekers, which could explain why so many are dropping out of the labor force.

The story isn’t all doom and gloom. Layoffs haven’t hit every sector equally, with the impact being more concentrated in specific areas like technology and white-collar fields. Nevertheless, this targeted job loss highlights the unevenness of the economic recovery.

The labor market isn’t falling apart, but all of this weakness shows that cracks are forming that you wouldn’t pick up if you were analyzing the economy at the headline level.

AI, LLMs, and the Hidden Skills Shift in the Evolving Job Market

In January, the tech sector experienced a significant workforce reduction of almost 16,000 employees, the highest since May 2023. This places tech as the second-hardest hit sector, trailing behind finance.

Leading this trend are major companies, such as Amazon, which recently cut roles in entertainment, devices, and games, citing a strategic shift towards AI priorities. This move follows their July 2023 layoffs in the pharmacy unit, affecting around 80 employees. Similarly, Alphabet, Google’s parent company, has continued shedding staff after last year’s record-breaking layoffs of 12,000 employees, focusing on areas like AI.

In alignment with this industry-wide shift, Google CEO Sundar Pichai addressed the need for “tough choices” in a recent memo, emphasizing ambitious goals and big priorities. He confirmed ongoing, albeit smaller-scale, layoffs in 2024 to “create the capacity for this investment.”

While some companies allocate resources for AI development, others, like Duolingo, a language-learning software company, announced a 10% reduction in its contractor workforce. The company aims to integrate AI into content creation processes, reflecting a broader trend of AI-driven operational changes beyond traditional tech sectors.

AI adoption is not exclusive to tech companies. UPS, responding to a shipping slowdown, plans to cut 12,000 jobs. These positions may not be reinstated even with business recovery, as machine learning integration allows UPS to optimize customer shipment charges, reducing the need for personnel in the pricing department.

The initial surge in hiring and expansion, driven by pandemic growth and favorable interest rates, has given way to a more restrained economic landscape with rising borrowing costs. A longer average worker tenure in current positions has made layoffs more prevalent. Management experts attribute this to evolving dynamics, leading some companies to mandate a full-time return to the office in response to the changing employment landscape.

Beyond Degrees: The Imperative of Skills-Based Hiring in the Evolving Job Market

American prime-age workers point to structural changes in the economy that have left them anxious about the future. The decline of company pensions has shifted more of the risk of funding retirement from employers to workers. And many who once thought they could count on a college degree as a ticket into the middle class now question its value.

A new study by the Burning Glass Institute and Strada Education Foundation paints a sobering picture: half of all college graduates find themselves in jobs that don’t require their degrees within a year of graduation, and nearly half lack jobs requiring their specific skills five years later.

This decline in the perceived value of a traditional college education mirrors a broader shift in the perception of “job-ready” skills. While a degree might still hold some weight, employers are increasingly seeking graduates with a different set of competencies, leaving many feeling their academic journeys haven’t equipped them for the realities of the job market.

Employment outcomes by years after graduation | Source: Burning Glass Institute analysis of Lightcast Career Histories Database, 2022. Calculated for workers with a terminal bachelor’s degree.

The expectation of a perfect job after a bachelor’s degree can lead to disappointment when graduates face a competitive job market and student loan debt.

The study further reveals a stark disparity across different fields. While graduates in engineering and healthcare professions experience the lowest underemployment rates, those in public safety and security face the highest. This uneven landscape highlights the need for a more nuanced understanding of how various disciplines translate into employable skills in the current market.

Occupational employment outcomes by degree field | Source: Burning Glass Institute analysis of Lightcast Career Histories Database, 2022. Calculated for workers with a terminal bachelor’s degree.

The decline in confidence in higher education isn’t surprising. Gallup reports a dramatic drop in the percentage of Americans who believe college is worth the cost, falling from 57% to 36% in just a decade.

Source: Gallup

However, the study isn’t a complete indictment of higher education. The data suggests that a college degree can still offer a lifetime earning advantage, with graduates earning nearly 90% more than high school diploma holders in their 20s. Nonetheless, the distribution of benefits is uneven, raising questions about the return on investment for many graduates.

So, where do we go from here? We need to focus on the “first post-college job” as a crucial stepping stone. Equipping graduates with the skills and guidance necessary to secure a career-relevant initial position is critical. Additionally, internships were found to reduce underemployment significantly, particularly for graduates in social sciences. This underscores the value of real-world experience in bridging the gap between academic learning and marketplace demands.

The takeaway from this study is not that a college degree is worthless but rather that its value is no longer a one-size-fits-all proposition. As the skills employers seek continue to evolve, higher education needs to adapt to ensure graduates possess the necessary tools and knowledge to navigate the changing landscape and unlock their true earning potential. It’s time for both institutions and students to have a candid conversation about the evolving value proposition of a college degree and how to ensure it prepares graduates for the realities of the modern workforce.

Additionally, this changing skills landscape presents a significant challenge for employers as well. To stay competitive and attract top talent, they need to move beyond traditional degree-based hiring models and embrace a skills-based approach. This means focusing on identifying and evaluating candidates based on their demonstrable skills and experiences, regardless of their educational background.

Consider this, despite persistent skills-gaps and labor shortages, job postings exclude millions of qualified Americans. This exclusion is not based on race, ethnicity, gender, age, or disability, which would be illegal, but rather stems from the absence of a bachelor’s degree – a condition affecting around two-thirds of US workers.

The issue lies in the screening process that dismisses these applicants without assessing their aptitudes and mindsets. While not illegal, degree discrimination is a detrimental bias that keeps organizations from recognizing the talent they need and perpetuates existing economic inequalities.

Employers, in adopting automated methods to screen applicants due to the surge in online job-searching, often overlook millions of skilled workers. Research by Joseph Fuller of Harvard Business School reveals a lack of thoughtful consideration in this process, as “requirements” are routinely copied from one job description to another.

The prevalence of college-degree discrimination has become so ingrained that it is almost taken for granted. Despite fewer than 4 in 10 American workers holding bachelor’s degrees, almost three-quarters of new jobs from 2007 to 2016 required this credential. This situation poses a significant challenge in addressing the skilled-worker shortage post-pandemic.

While certain professions necessitate specific degrees, demanding a generic college degree for roles like office manager or sales representative lacks practicality. A bachelor’s degree is not the sole indicator of cognitive skills, commitment, or the capacity to learn. There exist over 70 million workers without bachelor’s degrees, often skilled through alternative routes such as military service, certificate programs, and community college.

Essential workers demonstrated commitment and ingenuity during the COVID-19 pandemic, two-thirds of whom were STARs (Skilled Through Alternative Routes). Yet, employers tend to overlook STARs, investing time and resources in recruiting college-educated workers.

The seemingly innocuous phrase “bachelor’s degree required” has severe repercussions for workers and the economy, particularly affecting Black, Latino, and rural workers. This requirement excludes nearly 80 percent of Latino workers, almost 70 percent of African Americans, and over 70 percent of rural Americans. Smaller businesses struggle to find workers, while larger companies poach employees, exacerbating economic toxicity.

Forward-thinking employers are revising job descriptions to prioritize relevant skills over degree attainment. IBM's New Collar jobs initiative, for instance, removed degree barriers, focusing on skills. Companies committed to racial inclusion are realizing the importance of a “skills signal” over a mere “virtue signal.”

It is great to see that the sentiment is echoed across online job platforms. LinkedIn CEO, Ryan Roslansky said in 2021 that the company is championing skills-based hiring tools, acknowledging the need for accessible pathways to lucrative careers that align with the demands of the modern economy. This echoes a similar movement at the government level. The Biden administration also issued an executive order prioritizing inclusive hiring practices within the federal government, the nation’s single largest employer.

The hope is that degree-based hiring, excluding qualified individuals, will become a relic of the past. The so-called skills gap is, in reality, an opportunity gap. Employers, having played a role in its creation, can also lead in dismantling and replacing it.

Navigating the Employee Confidence Maze: What’s Driving the Current Workplace Sentiment?

Glassdoor’s recent Glassdoor’s Employee Confidence Index, published last week, not only highlights the struggles of mid-level managers but serves as a poignant reflection of the broader employee sentiment. As companies grapple with layoffs and return-to-office directives, the overall confidence levels, according to the data gleaned from tens of thousands of US employee ratings, have slumped from 45.7% in January to 45.1% in February. This marks the lowest point since Glassdoor began its data collection in 2016.

Source: Glassdoor

Middle managers, bearing the brunt of these challenges, have witnessed a substantial 6.3% drop in confidence over the past year, falling from 54.6% in February 2023 to 48.3% in February 2024. Their experiences are not isolated, echoing the widespread sentiment among employees at various levels.

The current landscape, termed the ‘year of efficiency,’ places enormous pressure on mid-level managers, compelling them to achieve more with fewer resources while navigating the demands of higher-ups and addressing the concerns of their subordinates. Daniel Zhao, Glassdoor’s lead economist, notes that as the efficiency mandate extends into 2024, middle managers grapple with managing organizational changes, including layoffs and return-to-office transitions.

The challenges faced by middle managers resonate with employees across the board, reflecting higher burnout levels and increased job stress reported by employers. The burnout epidemic is pervasive, affecting employees at all levels, and is exacerbated by the weight of executing corporate decisions, from layoffs to intensified performance evaluations.

A Gallup survey of Fortune 500 chief HR officers in 2023 found that 55% of managers are actively seeking new roles, surpassing the 49% of individual contributors pursuing similar paths. This widespread inclination for change underscores the broader dissatisfaction and strain felt by employees.

Middle managers find themselves in a delicate position, managing not only the operational challenges but also facing heightened vulnerability to layoffs themselves. This paradox, where middle managers tasked with implementing efficiency measures are among the first to be cut, accentuates the challenging climate employees face across various roles.

As the traditional employment landscape transforms, companies that adopt innovative hiring strategies may discover new avenues for success and resilience. While the data reflects a somber reality, the evolving employment landscape could pave the way for a brighter future for organizations and employees alike.

The Future of Employment, Hiring, and Emerging Technologies

As the job market undergoes significant change, Indeed’s strategic pivot towards job advertising stands out as a bold and calculated move. This shift comes at a time when industry giants like Google are scaling back on their advertising offerings. Indeed’s focus on connecting employers with potential hires seems particularly well-timed, aligning perfectly with the evolving needs of recruiting teams and organizations facing a squeeze on their margins and a decline in overall productivity.

While the decision to prioritize job advertising might seem obvious, the depth of Indeed’s strategy goes beyond simply placing ads. Their recent foray into Specialist Media Networks signifies a multi-dimensional approach. By focusing on targeted advertising within niche tech-oriented websites and publications, Indeed is making a clear departure from the conventional, one-size-fits-all cost-per-click model. This shift suggests a move towards a more sustainable business model that caters directly to the specific needs of both recruiters and job seekers in today’s environment.

By focusing on targeted advertising within highly relevant publications, Indeed can offer employers a more efficient way to reach qualified candidates – a critical advantage in a competitive hiring landscape. Additionally, it allows them to present themselves as a strategic partner to recruitment teams, offering valuable insights and data beyond just ad space.

While the long-term impact of this shift remains to be seen, one thing is clear: Indeed’s strategic pivot towards job advertising demonstrates a keen understanding of the changing job market.

Companies, like Salesforce, are doubling-down on skills-based hiring by introducing the Trailblazer Career Marketplace, which was announced in December 2023. This job site is linked to Salesforce’s Trailhead learning platform, providing a practical solution for both job seekers and employers.

This move by Salesforce suggests a commitment to fostering a more inclusive and efficient hiring landscape, where individuals are assessed based on their capabilities rather than conventional qualifications.  Candidates can now highlight their capabilities beyond traditional career paths. This opens doors for those with non-linear career journeys or those transitioning from different industries.

Platforms like Trailhead incentivize ongoing skill development. By integrating learning and job boards, Salesforce creates a virtuous cycle – job seekers are constantly upskilling to meet market demands, making them more attractive candidates.

While these are just two of the many significant moves in the recruiting technology space, combined, Indeed’s strategic shift towards job advertising complements Salesforce’s Career Marketplace beautifully. Imagine Indeed’s vast reach connecting job seekers with broader employment opportunities, while platforms like Trailblazer Career Marketplace offer deeper candidate evaluation. This combination caters to both the scale and skill-specificity that employers increasingly demand.

Conclusion

The current job market is a landscape of contradictions. On one hand, we see headlines about widespread layoffs and underemployment. On the other, employers struggle to find candidates with the specific skills they need. Fueled by rapid technological advancements and evolving employee expectations, this mismatch has created a breeding ground for burnout and frustration on both sides of the hiring equation. The narrative around skills has never been more critical.

This complex ecosystem presents a unique opportunity for staffing and recruiting firms, often perceived as slow to adapt. Traditionally, their role has been to fill specific hiring gaps. However, the future lies in becoming true talent partners. By leveraging deep industry expertise with access to richer candidate data sources, staffing and recruiting firms can personalize the experience for employers and job seekers. This translates to proactive engagement downstream, building relationships with potential candidates well before they actively seek new opportunities, and understanding their motivations and skill sets beyond the limitations of a resume.

The key to this personalized approach lies in building comprehensive candidate profiles. Imagine a world where recruiters and talent sourcing professionals possess a deep understanding of a candidate’s career aspirations and skillset, not just the information gleaned from a resume. This allows them to curate targeted job opportunities and, in partnership with employers, architect candidate journeys that address specific needs and pain points. Forward-thinking firms that prioritize building these powerful data repositories will emerge as the talent partners of choice.

The human touch that staffing agencies bring – building trust and fostering personalized experiences – remains critical. However, this human touch must evolve alongside candidate expectations. Today’s job seekers crave a deeper understanding of their needs and goals. Staffing firms can bridge this gap by leveraging data-driven insights while maintaining the personal touch that builds trust and fosters long-term relationships.

Curated talent pools are another advantage that staffing agencies possess. But “curated” no longer means static. Given the pace of the job market, these pools must reflect the latest view of talent. Platforms like Chatterworks showcase how technology can enhance this process. By delivering real-time, verified candidate data, we ensure that candidate profiles are continuously updated and our customers only have the most actionable information on their talent pool.

The rise of skills-based hiring and deep candidate data is not just about survival; it’s about leadership. By embracing the right combination of tools, people, and processes, recruiting and staffing firms can transform from niche players to strategic partners, guiding both employers and job seekers through the complexities of the modern job market. This is your chance to lead the charge in connecting talent with opportunity in this exciting new era.

Want to learn more about how ChatterWorks can help you navigate the current talent market? Book a demo to see us in action!

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