Despite fears of a recession with last year’s record-high inflation and massive tech layoffs slowing down the average wage growth, Washington’s labor market is still going strong.
While the number of job openings in the state declined slightly in May, hiring has risen and rates of workers leaving jobs have slowed, according to the latest data from the Bureau of Labor Statistics.
“At least for right now, Washington’s labor force is churning less than some other parts of the country,” said Jacob Vigdor, an economist with the University of Washington’s Evans School of Public Policy.
In May, Washington recorded 189,000 job openings in the state, which was 24,000 fewer than the previous month. Yet the number of hirings recorded (152,000) in May was still significantly higher than the number of people who quit or were laid off (122,000) that month.
“That means our labor force is growing,” Vigdor said. “We have more people starting jobs than finishing jobs, so it looks like things are going up in Washington state.”
Churn in the labor market usually tracks with disruption. The COVID-19 pandemic was a major disruption, and getting back to normal has also been a disruption, he explained.
For example, people hired to deliver groceries may have gotten laid off as more folks have returned to in-person shopping. Other businesses that slowed during the pandemic have started to hire again.
“So that churn rate, combined with the fact that we still have pretty healthy job openings and hiring rates, indicates the labor market is kind of getting back to normal, and it’s a healthy normal,” he said, adding that the economy today bears a lot of resemblance to that of 2019.
As of June, Washington’s unemployment rate remains one of the highest in the nation, yet it is still lower than it was in 2022. With a ratio of less than one unemployed person per job opening in the state, there are still plenty of opportunities for people who are looking for work.
“The biggest difference for the Seattle area is there has been disruption to tech, so that segment of the market is probably softer than it was,” Vigdor said. “I still think if you know how to write code, it’s not that hard to find work here, though it may now pay a little less than it would have four years ago.”
At the other end of the spectrum, in the service sector, which has recorded some of the largest increases in employment and average wages in Washington, the labor market is still tight as ever.
It remains difficult to find people to fill jobs in the hospitality and food industry.
“In part that’s because Seattle is an expensive place to live,” Vigdor said. “Even if you’re trying to hire someone for $20 an hour, they’re going to discover that $20 an hour doesn’t get you very far here.”
As the economy bounds back to a pre-pandemic normal, there are still some aspects that are different from before.
Borrowing is now more expensive with the Federal Reserve’s hikes in interest rates to cool off inflation. So far, they have been a success, as inflation has slowed without any real spike in unemployment or other bad labor market data, Vigdor said.
However, higher borrowing costs are still impacting startups and small businesses looking to expand operations, which could spell trouble in the future for the labor market.
With the Fed raising rates, there’s the possibility that banks might suddenly tighten lending to startups.
“And to the extent that the labor market depends on startups, it creates problems,” he said. “But if you have a labor market dominated by existing businesses with money in the bank, they don’t need to worry about borrowing to finance their operations or their expansion.”
Looking at the broader economic data, the economy may be headed for a soft landing, not a recession.
“Things could change, you never know,” he said. “But for the time being, things look good.”
