How AI Infrastructure and Healthcare Are Reshaping Hiring

SPEAKER_1 (0:00)

For more on the data, we are joined by Nicole Bachaud, the labor economist at ZipRecruiter. Nicole, thank you for being with us to take a closer look at the numbers that we got today. I mean, adding just 29,000 jobs in September, consensus was for closer to 90 I know you were looking for closer to 50,000. We're under no matter what metric you were looking for. And we also saw the prior two months revised lower as well. What does this report tell you about the underlying health of the labor market?

Nicole Bachaud (0:30)

After we got the rest of the data in September, it was clear that we were probably going to miss the mark for job growth. Treasury yields have hit 20-year highs and we saw the Fed increasing the Fed funds rate for the first time in over three years. That's leading to a tighter fiscal environment for employers. It's more expensive to borrow money, making it more expensive to expand operations and hire more people.

As a result, we'll likely see hiring growth, slowed down throughout the rest of this year, especially as inflation remains high. Hopefully those rate increases will lead to lower inflation, but the expectation is it's going to take a couple of months for us to see any real progress there.

SPEAKER_1 (1:10)

And unemployment also moving higher as well.

Nicole Bachaud (1:13)

We're at 4.2%.

SPEAKER_1 (1:14)

Now, you argue that increase is actually more about people entering or re-entering the labor force rather than a wave of existing workers losing their jobs. How should we interpret that distinction?

Nicole Bachaud (1:29)

In the September report, we saw employers pulling back, but workers were pretty optimistic that they were going to see more opportunities coming their way. We saw labor force participation increasing for the second month in a row after a year of consistent declines.

We saw more people coming back into the market, taking up unemployment because more people are looking for jobs, not because fewer people have jobs. So that's really where those changes are coming from. That's slight movement for unemployment.

SPEAKER_1 (1:57)

Nicole, at what point does the slow hiring become a bigger problem for the people who are already looking for work? Are we seeing from your perspective the beginning of a longer duration unemployment problem now that we have participation rate rising to 61.8 percent?

Nicole Bachaud (2:17)

So this market, what we see is a lot of stability for the actors who are in place. Workers with jobs are holding very tightly to those positions. Employers are not letting go of their stable workforce, and they're not really looking to expand it either. This low turnover environment is making it very difficult for somebody who is unemployed to find their way back into full employment. As we see slower job growth persisting in the next couple of months, it's going to become more challenging for that long-term unemployed pool. We've already seen long-term unemployment taking up now 27 percent of the overall unemployment level, and that will likely continue to become more of an issue as hiring is slow.

SPEAKER_1 (3:02)

With this slow hiring and we also have wage growth slowing now to three percent year over year, we of course have inflation above that. Does that create a labor market that is less attractive for workers if nominal wages are still rising?

Nicole Bachaud (3:20)

Absolutely. We're seeing this challenge of affordability that's persisting across the labor force. The bulk of US consumer market is now facing slow wage growth. We're seeing workers who are part-time for economic reasons are back up, meaning somebody who wants full-time work isn't finding those hours. Slow wage growth, not enough hours, and persistent inflation is really creating a lot of affordability concerns for folks and making this labor market not very attractive for people looking to enter.

SPEAKER_1 (3:50)

Nicole, you had some very interesting trends in your research, and we talk about the sectors that are holding up the labor market, and one of the most common conversations I have is in the data center build out, and you highlight a very interesting trend. Data center job postings have surged, but the median pay for those postings has fallen. How are you reconciling the explosive demand for AI infrastructure with cooling compensation?

Nicole Bachaud (4:18)

As this new kind of industry and this very significant increase in job growth for data center builds has really come up in the market, we've seen a lot of demand across different labor markets across the country for construction workers, electricians, operators to manage the facilities once they're up and running. But as this is becoming more of a commonplace, more of an understood job, we're seeing those wages change as employers figure out what skills they're actually hiring for, how permanent these positions are, what they need to get done to have an operational facility. That's really leading to this decline in the median wage that we see in job offerings across these postings.