Washington state map noting unemployment rates by county
Blog Post

Report: The New Labor Landscape for Small Businesses

  • July 2, 2024

The labor landscape touches every audience of a small business – customers, staff, and potential employees. We’ve pulled together both national and local data on employment, unemployment, and employment trends, and they reveal a unique landscape for businesses to manage in 2024.

Labor markets are strong and growing nationally. But, even with job growth, unemployment also is on the rise, both in Washington state and across the country.

The relative strength of the economy also means employers have an interesting balancing act when it comes to remote work. Employers have begun calling workers back to the office, which is beneficial for employers in terms of compensation and employee satisfaction. And yet, not always, our research found. Businesses are finding a new option: Allowing remote work to acquire or retain talent to aid employees in the cost of living. In some cases, companies are sharing those savings with employees.

Strength in Jobs Growth

Both Washington state and the nation’s economy are creating more jobs.

Private sector employment in the United States hit a new record in May, according to the ADP Research Institute. U.S. private sector employment reached nearly 133 million after rising each month in 2024 thus far. That’s up from 131.3 million in January 2024 and well above the pre-pandemic record of 124.7 million.

Washington state also has seen job growth, adding 5,200 to non-farm employment in April and 8,400 jobs in March, according to the latest reports from the U.S. Department of Labor. Across the state, every county is showing job growth (across private and public employment):

Yet, Unemployment is Rising

The national unemployment rate is now up to 4%, according to the St. Louis Federal Reserve Bank. Looking back to March 2022, the month of the Federal Reserve’s first rate hike, unemployment was 3.6% then. That would make the country’s current unemployment rate a high point for this period of elevated interest rates.

Yet, state-specific data shows unemployment is not rising across the country. Four states – Minnesota, Mississippi, Massachusetts, and Georgia – report year-over-year declines in unemployment, according to the U.S. Department of Labor. Washington, Connecticut, and Rhode Island are the only states reporting greater than 1% increases in unemployment compared to a year ago.

Still, current levels of unemployment remain low relative to U.S. history, according to the St. Louis Federal Reserve Bank.

Source: Unemployment, St. Louis Federal Reserve Bank, May 2024

Job Strength and Weakness by Industry

According to ADP, job gains were slower in May due to a steep decline among manufacturers. Leisure and hospitality also showed weaker hiring.

Trade, transportation, and utilities, on the other hand, posted the biggest gains, followed by education and health services (two sectors reported together by ADP), and construction.

“Job gains and pay growth are slowing going into the second half of the year,” said Nela Richardson, chief economist at ADP, in a recent report “The labor market is solid, but we’re monitoring notable pockets of weakness tied to both producers and consumers.”

 Digital Job Mobility

 According to the ADP report, among the top three industries for job growth in May was professional and business services – jobs that usually only require a computer and an internet connection. As has been widely covered since the pandemic, social distancing allowed job seekers to access new, non-local labor markets through remote work.

“Armed with the pay data of more than 25 million people, or about one-sixth of the U.S. workforce, we identified pay trends that are shaping the economy,” ADP’s Richardson said. “One of the biggest changes in the workplace has been the increase in remote and long-distance work.”

The payroll provider reported that the number of people reporting to remote managers shows no sign of slowing. About 31% of the U.S. workforce now work remotely, up by 8% compared to February 2020.

“In aggregate, the effect of long-distance work on pay is staggering,” Richardson said. “People who took new long-distance jobs were paid, on average, 16% more than people who stuck to local employment…it’s not always worthwhile for employees to work locally.”

Yet, even with its compensation benefits, ADP said a return to some contact with a team and an office – hybrid work – is helping employee sentiment reach new highs.

Employee Sentiment Reaches New High

A move to hybrid work has boosted employee motivation and commitment to new records in 2024, according to ADP’s Research Institute Employee Sentiment Survey, which began polling in January 2022. But researchers don’t pin all of that on return-to-office announcements.

Overall “every sector but one saw an increase this month. Only the volatile real estate sector saw a decline,” said Dr. Mary Hayes, director of People and Performance Research at the ADP Research Institute in the survey’s report.

What role did remote and hybrid work have in employee sentiment?

In 2023, for the first time since the pandemic, more than half of the workers polled by ADP’s sentiment survey were on-site, and gains in onsite largely came at the expense of remote-only work.

“This shift is important because when it comes to employee engagement and work location matters,” ADP said. “Hybrid workers are 1.7 times more likely to be fully engaged than on-site workers, and 1.9 times more likely to be fully engaged than people who do their jobs remotely.”

Does the data suggest employers should mandate full on-site if they can? Not so fast.

The Cost of Living Opportunity

For employers, the benefits of local, hybrid employees are clear, according to ADP’s findings; they’re cheaper and happier in their jobs. It’s also clear that those mandated to full on-site work are the least happy.

But that’s not all ADP found in its research. Employers are beginning to split geographic cost savings with their workers. “Employees who go remote can raise their standard of living overnight by moving to a city with less expensive housing and an overall lower cost of living,” said Issi Romem, economist for the ADP Research Institute. “But our research found that employers can share in the geographic cost savings, too.

Perhaps most important,” he continued, “the widespread acceptance of long-distance labor has improved the odds that workers and jobs will be well-matched, which stands to help the labor market as a whole.”

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