New projections from the U.S. Bureau of Labor Statistics (BLS) show that the labor force is getting older and that job creation will slow in the near future. The demographic shift will result in a lower rate of participation in the labor force overall and, in turn, fewer employment opportunities will mean increased competition among those already struggling to find new jobs.
The U.S. civilian labor force will grow at an annual rate of just 0.5 percent from now until 2024, according to the BLS’s Employment Projections 2014-24 report. That is down from an annual rate of 0.6 percent from 2004-14 and an annual rate of 1.2 percent from 1994-2004.
This slowdown is due in part to economic conditions but also is connected to the increased number of people reaching retirement age and subsequently leaving the labor force. The median age of the labor force was 37.7 in 1994, but it rose to 40.3 in 2004 and 41.9 in 2014. It is projected to be 42.4 in 2024, according to the BLS report.
Overall, the labor force’s transition from goods-producing to service-providing will accelerate in the next decade, according to the report. Service providers will represent roughly 95 percent of all new jobs added between 2014 and 2024, and the health care and social assistance sector will become the largest major employment sector during this time, overtaking the state and local government sector.
Manufacturing employment, meanwhile, will continue its steady descent but at a reduced pace. Those jobs will decline by 0.7 percent annually between 2014 and 2024, compared with a 1.6 percent decline on an annual basis from 2004 to 2014, according to the BLS.
Looking for Clarity in the Near Term
HR professionals have expressed both confidence and frustration with the U.S. labor market as of late, according to recent research from the Society for Human Resource Management (SHRM). Nearly 7 in 10 (69 percent) respondents to SHRM’s Jobs Outlook Survey for the second half of 2015 had some level of confidence in the labor market and expected job growth; this was the highest level of optimism among HR professionals since the survey was launched in January 2009.
Others in the industry, however, struggled to fill openings at their organizations throughout 2015. Recruiting difficulty—which measures how hard it is for HR professionals to hire people for key positions—was at four-year highs for the bulk of 2015 in the manufacturing and service sectors, according to SHRM’s Leading Indicators of National Employment (LINE) report.
Looking ahead, here are several projections for the labor market in 2016:
- The National Association for Business Economics (NABE), a Washington, D.C.-based trade group, projects that an average of 210,000 jobs will be created per month in 2016. NABE’s survey panelists expect the unemployment rate to average 4.8 percent in 2016, falling as low as 4.7 percent in the fourth quarter of the year.
- Projections cited by the Federal Reserve’s board of governors and bank presidents during its December 2015 meeting ranged from an annual unemployment rate of 4.3 percent to 4.9 percent in 2016, from 4.5 percent to 5.0 percent in 2017 and from 4.5 percent to 5.3 percent in 2018.
- The International Monetary Fund (IMF), in its October 2015 World Economic Outlook, expects the U.S. unemployment rate to average 4.9 percent in 2016. The country’s medium-term economic prospects “remain subdued,” the IMF said, reflecting a combination of lower investment, unfavorable demographics and weak productivity growth.
- Employers will increase their college graduate hiring by 11 percent in 2016, according to the Job Outlook 2016 survey from the National Association of Colleges and Employers (NACE). Employers’ views on the health of the labor market are also improving, NACE said. More than 2 in 5 (42 percent) characterized the job market for Class of 2016 graduates as “very good” or “excellent,” compared with just 18 percent from the Class of 2014 survey.
Joseph Coombs is a senior analyst for workforce trends at SHRM.
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