Among Private Sector Job Growth Over 6 Months,
Service Industry Accounts for 63%
Offsetting Large-Scale Layoffs in IT Sector
[Asia Economy Reporter Lee Ji-eun] Amid concerns about an economic recession, major U.S. big tech companies have recently announced restructuring plans involving tens of thousands of layoffs. However, U.S. employment data shows resilience. At the center of these contrasting views is the service sector. Analysts say that the significant increase in service sector jobs is offsetting the large-scale workforce reductions in big tech.
◆Significant Increase in Service Sector Jobs
According to the Wall Street Journal (WSJ) on the 9th (local time), the total number of jobs added in the U.S. over the past three months reached 1.1 million. In particular, last month, non-farm payrolls increased by 517,000, far exceeding Dow Jones' forecast of 187,000.
Most of these new jobs are concentrated in the service sector. Among the private sector jobs added over the past six months, service sector jobs accounted for 63%, a 47% increase compared to the previous year. Additionally, wages paid by employers in the service sectors such as healthcare, education, and leisure accounted for 36% of total private sector payrolls.
Thanks to the increase in service sector jobs, U.S. employment indicators have shown strong performance despite large-scale restructuring by big tech companies. Last month, the U.S. unemployment rate was 3.4%, the lowest in 53 years since May 1969.
The technology sector, which grew rapidly during the COVID-19 pandemic, is now undergoing large-scale restructuring as the IT industry enters a downturn. Yahoo plans to lay off about 1,600 employees, or 20% of its workforce, by the end of this year, and Amazon has begun its largest restructuring since its founding by cutting 18,000 jobs. Over the past year, global big tech companies have laid off more than 60,000 employees. Technology sector jobs accounted for only 2% of private sector employment.
◆Strong Service Sector Employment Reduces Recession Risks
Among service industries, hotels, hospitals, and restaurants that had laid off workers due to COVID-19 are now actively recruiting.
Ellet McDonald, operations manager of the chicken restaurant 'Rain Chicken Finger' located in Texas, said, "I receive job offers every two weeks from four restaurant chain locations in Texas," adding, "Due to a shortage of hourly workers, I personally deliver and prepare food simultaneously."
Employers in the retail sector, struggling with labor shortages, are also raising wages. Ellet explained, "Since the second half of last year, many job seekers have applied because the hourly wage at the store, which was only $11 two years ago, has increased by $15."
Experts expect this trend to continue. Robert Frick, a corporate economist at Navy Federal Credit Union in Virginia, forecasted, "Nursing homes, daycare centers, and healthcare sectors will raise wages and implement various programs to bring back retirees for recruitment."
With employment stronger than expected, the market has revised its outlook on the possibility of a U.S. recession. Economists at Goldman Sachs lowered the probability of the U.S. entering a recession within the next 12 months from 35% to 25%.
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