Total hiring slowed in 2023

January 30, 2024

Job openings inched up slightly to nine million at the end of December from 8.9 million in November. Throughout 2023, monthly job openings averaged around 9.5 million, remaining 36% higher than pre-pandemic levels but down from the historic high of 11.1 million seen in 2022. This is slightly stronger than the real-time data from Indeed, which showed that job openings continued to slow in December, albeit modestly.

The ratio of job openings to unemployed job seekers held steady at 1.4 from November. Over the entire year, the ratio averaged 1.6, higher than the 2019 average of 1.2 but moderating from the peak ratio of 2.0 in December 2022.

Nondurable goods manufacturing saw a 30% decrease in job openings, marking the largest drop in 2023 compared to 2022. Sectors like professional and business services, durable goods manufacturing, accommodation and food services, retail trade and information experienced over a 20% average drop from the previous year as business activity slowed; the demand for workers also cooled.

Conversely, federal government, arts, entertainment, recreation and private education were the only sectors with job opening growth in 2023. The federal government led with a 16% gain, reflecting the need to replace a rapidly retiring labor force and the funds to staff up at the Internal Revenue Service. Hiring in the public sector finally crossed the peak hit in February 2020 in late 2023. Most of those gains in the actual employment data were due to an increase in hiring at the state and local level, largely n public education.

Total hiring in 2023 slowed to 71.4 million, down from the 2022 record high of 77.2 million. The reduced hiring pace contributed to a total job gain of 3.5 million in 2023, a decrease from the 6.3 million in 2022 and below the 4.1 million in 2021.

Quits also slowed to 44.8 million in 2023, down from the record 50.6 million in 2022, marking the end of the "Great Resignation." Professional and business services, durable goods manufacturing and state and local governments experienced the largest decreases in quits due to slower job openings and hires amid lower business demand.

According to the latest ADP report, the median wage premium for job switchers was less than 3%, a significant drop from the over 8% observed in the summer of 2022. This financial incentive further discouraged workers from changing jobs.

In contrast, layoffs and discharges increased in 2023 with over two million people laid off, after reaching record lows in 2021 and 2022. Despite the uptick, the levels remained lower than those observed in the 2010s, a trend attributed to robust economic growth and companies' reluctance to release workers after learning about the hiring challenges in the previous two years.