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News / Business

Seattle’s pandemic-weary workers may see a tougher job market in 2023

By Paul Roberts, The Seattle Times
Published: January 8, 2023, 6:02am
5 Photos
From left, Bill Landon, Kyle McCormick, Justin Fernandez, and Jim Dixon, standing, make up a small Ballard IT-services company on Dec. 21, 2022, in Seattle. Dixon says hiring is now easier, because there are more people looking for work.
From left, Bill Landon, Kyle McCormick, Justin Fernandez, and Jim Dixon, standing, make up a small Ballard IT-services company on Dec. 21, 2022, in Seattle. Dixon says hiring is now easier, because there are more people looking for work. (Kevin Clark/The Seattle Times/TNS) Photo Gallery

Almost three years after COVID-19 shut down the economy and put nearly half a million Washingtonians out of work, the job market remains in a state of confusing, unnerving flux.

In some industries, such as hospitality and white-collar services, recovering demand continues to fuel hiring and keep opportunities plentiful for workers.

In September, Justin Fernandez was recruited by Zen Techworks, a small but growing IT support services firm in Ballard — and is still getting five to 10 recruiter emails a week. “It just seems that the skill set I have is, at least for the foreseeable future, going to be in high demand,” says Fernandez, who helps solve customer IT problems over the phone and on-site.

Yet in other industries that previously seemed unstoppable, including software and other information-related businesses, many employers are freezing hiring or even cutting jobs.

“Six months ago, I would have felt comfortable I could land a new position fairly quickly,” says Patrick, who was among thousands of tech workers laid off in November by Seattle-area firms and who asked that his last name be withheld to protect his job prospects. “Now, I’m having to do a lot more [job market] research — and my research isn’t yielding the results I would’ve been hoping for.”

Signs of slowdowns in other sectors, such as construction and manufacturing, bolster forecasts of a major hiring downturn in 2023 — and the end, perhaps, of one of the most worker-friendly job markets in decades.

“A few months ago, I would have said it was a time where you could quit your job without having something lined up and everything would work out,” said Jacob Vigdor, an economist with the University of Washington Evans School of Public Policy who follows state and local job markets.

“I wouldn’t give that advice now.”

Still in the red

On the surface, Washington’s job market still looks reasonably healthy. As of November, overall employment was on pace to grow by around 5%, or roughly 170,000 jobs, in 2022.

Unemployment, though up slightly since summer, to 4%, is low enough that some businesses can’t find enough workers to handle all the returning customers.

At the Silver Cloud Hotel in downtown Seattle, general manager Bill Weise reckons he’s short by around 30 workers, or around 25% of his ideal staff level, and has had to cut the hotel’s restaurant hours and menu items to get by. “We’re ready for business, but we don’t have enough people to … service that business,” said Weise.

But look under the hood and the job market is far more fragile than it might seem.

Even with the past year’s strong growth, Washington is barely 67,000 jobs, or 1.9%, ahead of where it was in February 2020, before the first wave of COVID-related layoffs. That means COVID effectively cost Washington around 190,000 jobs — more than it likely added in 2022 — that would’ve been created had hiring continued at its pre-pandemic rate, Vigdor says.

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As important, that anemic recovery hasn’t been evenly distributed.

Industries such as trucking, warehousing and construction are now well ahead of pre-pandemic employment levels, as is professional services, a catchall for skilled office jobs like architecture, accounting and engineering. But others, including manufacturing, leisure and hospitality and much of retail, are tens of thousands of jobs smaller than they were in February 2020.

Some of those deficits reflect a supply problem: a pre-pandemic labor shortage that has worsened since due to factors like decreased immigration, early retirements, lack of childcare and high housing costs in urban job markets, economists say.

Many of the Seattle-area locations of Taco Time Northwest, for example, are still so short-staffed “that if someone is sick … we’ve got to close early,” says co-president Chris Tonkin.

Like many employers, Tonkin faces those shortfalls despite raising wages — in his case, by more than 20% since 2020. Statewide, the average annual wage was up 10% in 2020 and 7.4% in 2021, according to the U.S. Bureau of Labor Statistics.

Those shortages could slow hiring for years, in part because the underlying causes, such as high housing costs, “are not easily reversible,” says the UW’s Vigdor.

In other industries, however, the hiring slowdown is more of a demand problem, driven by more recent economic factors, such as rising interest rates and changing consumer spending, said Paul Turek, the state Employment Security Department’s state economist.

Much of the pandemic surge in consumer spending, for example, was propped up by federal pandemic relief funds, which have largely dried up, and by household savings and credit card debt, both of which “have an endpoint,” said Turek.

Those trends have already hit the tech sector, which has laid off or plans to cut as many as 18,000 workers in late 2022 and 2023 and has also eliminated thousands of job openings.

But hiring has also showed signs of slowing in other, previously fast-growing sectors. The number of posted job openings in construction, manufacturing, and professional services in October was down substantially compared to 12 months earlier, according to state data. Statewide, new job postings are down 25%.

The empire strikes back

In the short term, declining labor demand is shifting bargaining power back to employers.

For much of the past two years, many job candidates could “call their shots in terms of what they wanted to make, and they were only going to be working remote, and they wanted all this flexibility,” said Charlie Tierney, managing director at Mercer Island-based recruiter Hansell Tierney. “That’s not necessarily going to be the case moving forward.”

Adam Wray, CEO of AstrumU, an artificial intelligence firm in Kirkland, puts it more bluntly: These days, fewer candidates “come to us with Candyland-type expectations on salaries.”

Job seekers are also getting more solicitous in their job searches, judging from anecdotal accounts.

Jim Dixon, Fernandez’s boss at Zen Techworks, says recent workers in many skilled services such as IT support are still in high demand, even as hiring in many other sectors is slumping.

Where Dixon was routinely “ghosted” by candidates during previous hiring efforts — “We’d have in-person interviews scheduled and they just didn’t show up” — more recently, “the ghosting piece has not happened at all,” he said.

But employers’ gains often mean more pain for workers, who may now spend more time looking for jobs that pay less. Nadir Khan, a former Amazon Web Services employee, told The Seattle Times in November that many offers he has received were for less than he was making at Amazon.

“If you’re being paid a lot at a Big Tech company and … you do get laid off, it’s very likely you’re going to be making less money,” Khan said.

This labor market power shift will be especially challenging for workers in lower-paying industries.

When Lillian Outson quit her job as a rental property manager last year, she expected to quickly find a new position for the same or more money. Instead, the 24-year-old Seattle resident spent six months filling out applications, often not hearing back for weeks or months. Outson finally took a food service job — in the cafeteria of a tech company office — for $7 an hour less than her previous job had paid.

Outson is glad to have the work, but she’s surprised by how dramatically the job market has changed since her first foray five years ago, when openings seemed “endless” and nearly every place she applied to “called me back and wanted to set up an interview.”

Soft or hard landing?

Just how far that job market rebalancing goes isn’t clear.

Nationally, some experts expect a recession this year to freeze hiring for several years. Others hope a “soft landing” can let the overheated labor market cool without crashing.

In Washington, job growth is expected to fall sharply, from 5.2% last year to 0.9% in 2023 and just 0.4% in 2024, before leveling out near 1% through 2027, according to the state Economic and Revenue Forecast Council’s latest report.

Some industries will buck the slowdown, if only briefly. Aerospace employment, for example, will jump by 6.1%, or around 4,000 jobs, this year before falling to 2.1% in 2024 and 0.3% in 2025, the council says.

Other industries are already slowing. Construction hiring likely peaked in late 2022, mainly as residential housing cooled, and the industry is expected to actually lose jobs again this year. Hiring at software firms, meanwhile, is expected to slump from a forecast 6.1% in 2022 to 2.3% this year and 1.1% in 2024.

Experts don’t anticipate a repeat of the massive layoffs of the early pandemic, when unemployment hit 16.3% and Washingtonians filed hundreds of thousands of unemployment claims a week.

Still, unemployment is forecast to rise to 5.2% by 2024, versus 3.7% last year, the council says, which would mean roughly 40,000 more Washingtonians looking for work.

Turek, the state economist, thinks the slowdown is already showing up in weekly unemployment claims, which, though still low by historical standards, are trending up from last year’s weekly average.

“They’ve got a ways to go before we start sounding recession bells, but it seems to me that the process has been started,” Turek said.

Buckling down — again

Warnings like that have many workers bracing for a rough few years ahead.

Among them is Brian, a 67-year-old Seattle-area technical writer who was laid off in November. Brian, who asked to be identified only by his first name to protect his job prospects, isn’t expecting a quick reprieve: Of the 40 applications he has sent out so far, only four have generated responses, and all were rejections.

Brian isn’t panicking — his wife is employed and he planned to retire in a few years anyway. But he does worry for family members, including a daughter-in-law who was just laid off from Facebook parent Meta and a son who has been with his current employer just two years.

Brian says he constantly talks up the need to prepare for a pink slip with a “huge savings account,” as well as a big professional network that can help if a job search suddenly becomes necessary.

And don’t wait, he says. “Network as much as you can right now,” Brian advises. Because in a job market like this, he says, it’s not safe to put things off until “you get that gut punch, when they come in and tell you ‘You’re done.’”