Labor Market Trends

The U.S. labor market continues to be a major headache for business leaders. Current job openings continue to outpace unemployed individuals despite millions leaving or those forced to leave during the pandemic. In addition, low labor participation rates have contributed to less productivity and greater inflation, major issues plaguing the U.S. economy.

Looking ahead, leading economists expect the economy to sag in the first half of this year as quarantine savings that have cushioned many households are depleted. Likewise, those who stepped out of the workforce during the pandemic will begin job searching. We’re already seeing labor force participation rise slightly, according to the December U.S. jobs report that added 223,000 jobs.

Despite this, there is finally some good news. The rise in labor force participation could mitigate the labor shortage and alleviate some of the building inflationary pressures. It’s worth watching how the Federal Reserve responds to these developments, as it will contribute to whether the U.S. enters a deeper recession or experiences a softer landing.

The U.S. labor market continues to be a source of concern. Companies must have strategies to navigate the challenges presented by inflation, the potential for a recession, and changing consumer spending patterns. Here are three approaches that can help businesses retain and acquire top talent. Simultaneously they can help businesses proactively adapt to changes in the job market, and stay competitive in an evolving business environment.

NOW IS THE TIME TO ATTRACT TECH TALENT FOR LABOR MARKET

DOUBLE DOWN ON UPSKILLING HIGH-POTENTIAL EMPLOYEES

During a recession, companies may be forced to make difficult decisions about workforces, including implementing layoffs or hiring freezes. However, another path could be for organizations to focus on upskilling their high-potential employees instead of letting some go. This helps the business retain valuable talent, a top priority for CEOs in 2023. It also prepares employees for new opportunities within the organization, positioning them for future success.

Investing in employee development can also help the organization stay competitive and adapt to market changes. In the long run, upskilling high-potential employees can lead to improved productivity, increased innovation, and a stronger, more resilient workforce.

ENGAGE FREELANCE WORKERS TO FILL SKILL GAPS

A third of HR leaders plan to increase their freelance budget in 2023. Supplementing the workforce with contingent workers can help companies meet their workload needs, boost productivity, and get tasks quickly done—especially to meet short-term or urgent needs.

Fortunately, the supply of contingent workers looks ready to meet the demand. Eightfold AI’s analysis estimates a 25 percent increase in contingent workers in the U.S. this year.

Contingent workers are a valuable asset to any organization. They can be hired for specific skill sets on a project-by-project basis rather than tied to the needs of a full-time role. This flexibility allows organizations to engage specialized expertise as needed, complementing the growing trend toward skills-based hiring. This elastic approach to talent will enable companies to fill skill gaps and meet workload demands more cost-effectively.

Sania Khan is the chief economist at Eightfold AI, the AI-powered platform for all talent, and the author of Think Like an Economist. She previously worked for the U.S. Bureau of Labor Statistics.