The latest figures signal that labor demand is diminishing somewhat after a period of rapid catch-up hiring, even as an aging population with its attendant medical needs should underpin ongoing expansion over time. With the economy increasingly reliant on healthcare to power growth, that could keep broader hiring trends muted in the near term.
“Healthcare is among the sectors that employ the most people in the United States. Even small labor force changes in healthcare can affect national employment,” said Ge Bai, a professor at Johns Hopkins University who specializes in health policy. “The past increase might just reflect a Covid recovery trend, and now we have a little bit of a retreat.”
A post-pandemic boom in healthcare hiring propelled its share of the overall US workforce to a new record, continuing a long-running pattern. The sector now employs 11.2% of all working Americans, up from about 7.5% in 1990.
The initial surge in demand for workers in 2021 and subsequent waning has been evident in data on job openings. At their peak in 2022, healthcare listings were up 90% over pre-pandemic levels. But as of August, that number had come down to 29%, according to a monthly BLS report published Tuesday. The report also showed the rate of hiring as a share of total employment in the sector was lowest since early 2021, though layoffs remained muted.
“We’re seeing overall cooling, but performance still outdoes pre-pandemic numbers,” said Svenja Gudell, the chief economist at Indeed, the online job platform. “What we’re seeing is demand for nursing facilities has come down, but remains slightly elevated. Meanwhile demand for physicians specifically is up by 85%.”
Union representatives and financial analysts alike contend that employers and workers are increasingly at odds over pay.
After peaking on a relative basis in 2011, average hourly earnings for nonsupervisory workers in healthcare rose at a slower pace than the economy as a whole until the onset of the pandemic. From mid-2020 to mid-2022, wage growth for healthcare workers outpaced the national average, but has again fallen behind since then.
Nancy Hagans, the president of the New York State Nurses Association, said more than half of the licensed nurses in the state are not currently working in the profession due to the working conditions and pay on offer.
“Hospital corporations have been holding back, not hiring enough nurses because they feel that we have the highest payroll,” Hagans said. “Whenever we ask them to give us a raise, they always say, well, we don’t have enough money.”
While the national numbers indicate layoffs remain low despite the recent downshift in hiring, there have been high-profile examples of job cuts.
Texas Children’s Hospital, one of the country’s largest pediatric facilities, announced a 5% reduction in its workforce in August amounting to about 1000 jobs, citing “historic financial challenges” in the industry.
Downgrades of healthcare debt, meanwhile, are outpacing upgrades this year by about 1.75 to 1, according to Kevin Holloran, senior director for US public finance at Fitch Ratings. That’s down from a ratio of 3 to 1 in 2023.
Holloran sees strength in hiring continuing despite the broader financial challenges, though many institutions are increasingly facing difficult choices when it comes to staffing.
“If you’re looking to cut costs, unfortunately labor is often number one on the list because its your biggest expense,” he said. “Since the pandemic, every dollar is more precious than it used to be. Hospitals are having to make mission-versus-margin decisions.”
Economists are increasingly focused on the monthly jobs report following a recent rise in the unemployment rate to 4.2%, from a low of 3.4% last year. Softer hiring has been a major factor driving the Federal Reserve’s interest-rate decisions — leading the central bank to opt for an outsize half-point reduction in September — and officials have said similar moves could follow if the job market continues to weaken.
In Friday’s report, they will be keeping an eye on healthcare jobs in particular.
“We continue to expect health and education and government (along with leisure and hospitality to a smaller extent) to continue to drive the payroll numbers,” Bank of America economists wrote Tuesday in a report previewing the figures. “But we note that recent data have shown a slowdown in these ‘catch up’ sectors as they close in on their pre-pandemic trend.”
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