The Economic Indicators Dashboard update this month paints a resilient picture for the regional labor market.
What’s happening in the Charlotte Region’s labor market?
As we exit the first quarter of the year, the Charlotte Region remains strong with labor demand still outweighing labor supply. The labor market is somewhat tight with fewer people working and employers faced with hiring challenges for skilled talent. Employment in the services and health care sectors continues to increase, but fewer jobs are being added. Talent shortages remain an issue within these sectors with new job postings showing higher talent needs. Employers must decide whether to allocate more resources to incoming and existing talent to reduce turnover rates. Competitive wages, benefits, and recruitment incentives for companies are crucial to alleviate the persistent talent supply issues in those sectors.
With the economy slightly cooling down under the pressure of the Federal Reserve’s interest rate hikes, the job market is loosening and slowing down. Regional unemployment rose slightly from 3.1% at the closing of last year to 3.5%. Banking crises and massive layoffs in the country are driving this uptick in unemployment and labor force participation. However, the Charlotte Region’s job market outpaces North Carolina (3.1%), South Carolina (2.9%) and the nation (2.7%), with a year-over-year growth of 3.4% and ending the quarter with more than 1.3 million employed.
Peer metros such as Atlanta saw similar labor market performance at 3.3% whereas other metros show a year-over-year growth slightly above 5%. However, compared to the previous quarter, a decrease in growth across all metros indicates that we are heading towards a balanced labor market. While the hiring pace is slowing down, the economic development landscape in the region is fueling the labor market with the announcement of 1,500 jobs and $2.3 billion in capital investment in the first quarter, which will infuse growth in the labor market over the next few years.
Source: Bureau of Labor Statistics
The year-end saw each of these metros having a higher year-to-year employment growth compared to this first quarter ending in March 2023. The nation continues to face challenges around inflation and economic uncertainty. The Charlotte Region faces similar trends and is expected to be impacted by the likely recession predicted to start at the end of this year. It is predicted to be short and mild. Some of the driving factors behind the expected recession include inflation and labor market health. Both the U.S. and regional inflation rates are cooling at 5.6% and 6.6%. While the regional rate is still higher than 2021, month-over-month employment growth shows signs of steady recovery.
The stable and steady job market growth reflects the reality of recruitment pace in the region, which is now moving slowly after an over-hiring of workers and a counteraction to massive layoffs especially in the tech and innovation sector. Despite these challenges, employers like Microsoft, who cut 10,000 jobs in the Carolinas earlier in the year, continue to hire and execute development plans in the region.
The innovation sector posted 1,165 jobs by March 2023, more than double the number of the previous month. Postings account for 7% of all jobs posted in the region’s key targeted industries. Tech and innovation are driving employment dynamics in Charlotte’s job market. Industries including manufacturing, financial services, life sciences/health, and logistics and distribution are now heavily tech oriented, and companies are creating new positions to leverage human capital and the digitization of operations for efficiency. Life sciences, for instance, posted 40% of total jobs postings. This industry is gaining momentum and influencing talent shifts in the region, contributing to the emergence of non-traditional industry sectors.
The first quarter of the year shows key industries adding more jobs than others, but only slightly. Health services and education saw a year-over-year change of 6%. While the industry added fewer jobs compared to the end of last year, the region will experience a continued increase of health care companies recruiting more people. More workers will enter the labor market, especially with the innovation district center project set to be completed next year. Also, the region’s concentration of biopharmaceuticals and biotech is driving strong regional industry interests, hence creating opportunities for talent training through apprenticeships and collaboration between corporations and educational institutions.
Another industry that is showing consistent labor growth is leisure and hospitality. Like the health services, this industry also shows consistent recovery in post-pandemic, increasing year-over-year by 10.6%. The industry’s workforce is likely to grow in the next few months especially as the region heads into the vacation and tourism season. Spending from seasonal domestic and international visitors for sports events and general tourism creates opportunities for short and long-term job creation.
What are the implications of these trends and what’s next for the region?
The resiliency of the labor market does not shield the region against challenges arising from employment shifts and dynamics in the post-pandemic world. The phenomenon of AI automation is challenging for talent recruitment and slowing the recovery of the retail sector in the region. Retail stores like Walmart and Target are converting human productivity into automated customer self-services in the region. While job postings are showing talent demand, companies are experiencing lengthy hiring periods for roles requiring technical and analytical skills. These issues are creating talent retention issues for employers.
Layoffs are contributing to unemployment in the region and the possibility of a recession may increase the labor force participation rate. With the tech sector experiencing more layoffs, employers in other industries could use these opportunities to recruit unemployed tech workers and provide them resources for effective career transition. This shift will support the innovation economy in the region and break down traditional talent barriers.
Talent supply remains an issue with the region weathering high inflation. Employers and economic development leaders must think about innovative socioeconomic policies and strategies to motivate talent reentry into the workforce, especially female talent. Women employment took a hit during the pandemic. Issues such as a crisis of childcare centers availability and increasing costs are keeping women away from the workforce. It is crucial to create economic development incentives that could encourage companies to create childcare centers in or next to offices, warehouses, and business operations centers, and provide childcare costs subsidies for mothers and child-bearing age women in the workforce. This will also help reduce employment and wage gaps between men and women in the region.
Moving forward, employers and investors must monitor closely the inflation rate and any other shifts in the region’s economic indicators. Uncertainty about the economy’s trajectory is still high. However, there is hope that the long-term impacts of the Inflation Reduction Act will contribute to the stability of the economy by creating jobs and investment opportunities, like Albemarle’s lithium processing facility in Chester County and Pallidus’ semiconductor manufacturing facility in York County.
To read about other key indicators that are determining the region’s economic health and vibrancy, explore the interactive dashboard.
