2022 Was a Historic Year for Job Growth. What Does 2023 Have in Store?

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Are we in for another year of solid growth? 

It’s fair to say that 2022 was an interesting year, economically speaking. On the one hand, the stock market tanked, leaving investors with on-screen losses in their retirement plans and brokerage accounts. Inflation also wreaked havoc on consumers, forcing them to do everything from raid their savings to rack up credit card balances just to stay afloat.

But while the stock market was volatile and living costs were high, unemployment was really low in 2022. In fact, we closed out the year with a national jobless rate of 3.5% — the lowest number over the past 20 years.

Even more notable is the fact that the U.S. economy added roughly 4.5 million jobs in the course of 2022. That’s the second-highest number of new jobs in a single year on record. The highest number was 2021’s astounding 6.7 million jobs.

Of course, it’s clearly worth noting that a big reason job growth has been huge over the past two years is that 2020 was a record year for job loss. That year, the economy shed 9.3 million jobs in response to the pandemic.

But while job growth was solid in 2022, there’s some question as to whether that trend will continue into 2023. And unfortunately, we could see job growth slow down quite a bit in the coming 12 months. We may, in fact, even wind up with a bit of an unemployment problem on our hands.

What does 2023 have in store for the U.S. economy?

Without a crystal ball, we can’t predict how the next 12 months will shake out, economically speaking. But there’s reason to believe economic conditions could worsen.

The Federal Reserve remains concerned about inflation despite the fact that it’s cooled modestly since peaking in mid-2022. As such, the central bank plans to continue implementing interest rate hikes in 2023, which are apt to drive the cost of borrowing upward.

That could, in turn, lead to a major decline in consumer spending — a substantial enough drop to fuel a recession. If that were to happen, it could easily lead to an increase in unemployment levels.

In fact, a number of big-name companies have already announced plans to lay off staff to conserve costs. And while those decisions have largely come from the tech industry, which took a beating in 2022, we can’t discount the possibility of more layoffs in the coming 12 months.

Even if we don’t see an uptick in layoffs, there’s a good chance job growth will slow down in 202. That’s partly because companies are likely to be more conservative in their hiring practices in light of recession warnings, and because a lot of the jobs employers have needed to fill over the past couple of years have already been staffed. So while 2022 may have brought about 4.5 million new jobs, 2023 may not bring about nearly as many, and we could see a net loss in jobs by the time the year concludes.

Workers shouldn’t panic about the state of the labor market

While it’s certainly possible that job growth will slow in 2023 and that unemployment levels will increase, workers should recognize that we’re starting off the year in a very strong place. And also, we’re unlikely to go from record-low unemployment on a national scale to crisis-level job-loss numbers in a span of a few weeks.

If the economy starts to decline, there will almost certainly be warning signs. And from there, workers will know to start boosting their savings account balances to gear up for a potential recession and unemployment. (Granted, workers should be bolstering their savings already, given the warnings that have already been issued.)

Let’s also remember that if a recession hits in 2023, it may be short-lived rather than drawn out given that we’re starting off the year in a pretty solid place. That’s another thing that should help alleviate workers’ concerns.

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