Next year’s labor market could look like 2019

The job market is about to turn back the clock—about five years or so.

Higher labor force participation, wage growth and a strong health care sector are pushing the U.S. labor market back to its pre-pandemic trends, according to Nick Bunker, the director of economic research at Indeed — something he expects to continue into next year. “I think the 2024 labor market is going to rhyme a lot with the 2019 job market,” he told Quartz.

Before the pandemic, healthcare was a big engine of the US labor market, Bunker noted. But employment in the sector fell by half a million jobs (pdf) between February and December 2020, led by job losses (pdf) in nursing and residential care facilities, according to SU Bureau of Labor Statistics data. Unlike large employment gains in hospitality and leisure in 2021, healthcare jobs experienced little growth. But the sector started to bounce back in 2022 and then added an average of 54,000 jobs this year. Health care made up almost 40% (pdf) of overall job growth in November, according to employment data released Friday (Dec. 8) by the Bureau of Labor Statistics.

“This is a return to the status quo before the pandemic,” Bunker said. “Now we’re back to the long-term underlying trend, which appears to be health care as a source of job gains.” It is because Americans are getting older, and US health spending rises.

Labor force participation in November reached its highest rate, 62.8%, since the months before the pandemic, when it fluctuated from 63.2% to 63.4%. Unemployment also decreased slightly to 3.7% from 3.8% in October. Wages rose faster than inflation since May, but the pace has slowed.

“Nominal wage growth, or wage growth before inflation, scored to very high levels in 2021 and 2022,” Bunker said. “It’s coming back down to earth now.”

A soft landing for the economy

The November jobs report is another indication that a soft landing for the US economy is imminent.

Inflation and a overheated job market said the Fed interest rates increase a record 11 times since 2022. But in the last few months, the labor market has cooled enough to avoid further interest rate hikes while employment numbers have remained strong, experts say.

“Labor force participation, a slight decline in unemployment rates and a solid increase in job numbers…watch the narrative that we are headed for a soft landing that should not require any further hikes from the Fed and may indeed be consistent with cuts starting in mid-2024,” said Brett House, a professor of economics at Columbia Business School.

Americans feel better about the economy as inflation declines. Consumer sentiment has risen 13% so far this month, making up for Americans’ gloomy feelings over the past four months, according to the University of Michigan’s survey of consumer sentiment. And consumers’ inflation expectations fell to 3.1% in December from 4.5% last month, the survey found. People also feel better about the economy because they expect a positive impact from next year’s elections.

“Sentiment for these consumers appears to incorporate expectations that the elections are likely to produce results favorable to the economy,” Joanne Hsu, the director of consumer surveys at the university, wrote in a post about the findings.