The US job market may be a lot less vibrant than Federal Reserve Chair Jerome Powell and his colleagues seem to think.
Data published Wednesday by the Bureau of Labor Statistics suggest payrolls might have grown about 60,000 less per month on average last year than the roughly 250,000 run-rate derived from the agency’s monthly employment report. The new figures, from the Quarterly Census of Employment and Wages, cover more than 95% of US jobs. and are eventually used in annual revisions to the monthly data.
The QCEW release, as it’s known, adds to the uncertainty surrounding the state of the labor market as the US central bank deliberates over when to begin cutting interest rates. While some indicators — such as monthly payrolls and weekly unemployment insurance claims — suggest the market remains robust, others — such as rising unemployment and a decline in job openings — point to cracks developing.
“There’s a pretty good chance that the establishment survey has been really overstating the condition of the labor market,” Barry Knapp, founder of Ironsides Macroeconomics, said of the monthly payroll numbers. “The job market is weaker than the Fed thinks.”
To contain wage increases and help bring down inflation, the Fed has effectively been trying to loosen labor conditions by reducing demand for workers. If hiring has already been slower than widely perceived, that raises the risk that Powell and his colleagues will overdo it by keeping monetary policy too tight for too long.
“The Fed could be late to cut rates — cutting only when the labor market already is far into a downward spiral,” Anna Wong, chief US economist at Bloomberg Economics, said in a note published Tuesday.
Monthly employment figures due Friday are projected to show payrolls grew by about 185,000 in May after increasing 175,000 in April, a Bloomberg survey shows. The data are compiled by the BLS from a survey of some 119,000 businesses and government agencies.
The QCEW data, in contrast, are drawn from unemployment insurance tax records filed by more than 12 million establishments. The payroll numbers are benchmarked each February to bring them in line with the QCEW figures. The BLS provides an initial estimate of that revision in August.
A chunk of the potential overestimation of payrolls stems from adjustments the agency makes to the monthly employment report to account for the net amount of businesses opening and going under, Wong and Knapp said. Because the BLS only surveys existing establishments, it uses a so-called birth-death model to estimate those flows.
“The labor market saw a turning point sometime in the second half of 2023,” Wong said. “Business closures surged, while new business formations slowed sharply.”
Particularly Vulnerable
The problem, according to Knapp, is that small firms are particularly vulnerable to high interest rates, and thus more prone to go out of business — and that’s not being picked up by the monthly payrolls survey.
Still, even a significant downward revision only changes the picture of the job market from “boomy” to “healthy,” according to Burning Glass Institute economist Guy Berger. Meanwhile, others are cautious about drawing any implications from the QCEW data at this stage.
Moody’s Analytics Chief Economist Mark Zandi said the numbers are regularly revised, noting that initial concerns payroll data would be marked down significantly this past February in the annual benchmarking process proved to be misplaced. In the end, they were only about 18,000 less per month in the year through March 2023 than initially reported.
There’s also the matter of the recent surge in undocumented immigrants into the workforce. Sam Coffin, an economist at Morgan Stanley, said that phenomenon is more likely to be registered in the monthly numbers than the QCEW data because the latter is based on unemployment insurance filings and thus misses those who aren’t authorized to work.
The Fed needs to be careful as it sorts through the mixed signals emanating from the various labor-market indicators, said KPMG Chief Economist Diane Swonk.
“They’ve got to be worried about hitting a tripwire” and triggering a big increase in unemployment, she said.
Financial insecurity is deteriorating Americans' mental health, according to a recent study by MarketWatch Guides shared exclusively with Newsweek.
Even though inflation has eased considerably compared to its June 2022 peak, nearly half (47 percent) of respondents to a survey conducted by the financial news and market data company said that 2024 has been the most stressful year of their lives money-wise.
A majority of 88 percent of respondents said they feel some level of financial stress, and 65 percent said their finances are the biggest source of stress, which is having a significant negative impact on Americans' mental health.
Some 41 percent even said their finances have "destroyed" their mental health, and nearly two-thirds of respondents (64 percent) to the MarketWatch survey reported feeling "financial fatigue"—a sense of burnout or exhaustion when dealing with money matters.
Some 56 percent of respondents have experienced loss of sleep due to financial stress; 47 percent have felt physical fatigue; 45 percent have had headaches; 38 percent reported weight gain or loss; 34 percent noticed changes in appetite; and 33 percent experienced digestive issues.
But what exactly is stressing Americans out? Some 57 percent said the cause was the high price of essential goods; 47 percent pointed to their lack of savings, and 46 percent to their lack of income. Meanwhile, 37 percent blamed their debt, and 39 percent the performance of the U.S. economy. Some 36 percent said that the high cost of housing was causing them stress, while 33 percent pointed to high interest rates.
Dealing with such a stressful situation and the anxiety that this can trigger has led many Americans to avoid handling their finances entirely. Some 44 percent of respondents to the MarketWatch survey admitted that they will ignore a financial problem until it becomes a crisis. However, avoidance and neglect can further corrode an individual's vulnerable financial situation.
A significant percentage of respondents to the survey admitted to bad financial habits triggered by the stress they're experiencing. Some 58 percent said they do not use a detailed financial budget; 57 percent procrastinate on important financial decisions; 44 percent overspend to deal with stress; another 44 percent make purchases they cannot afford; and 41 percent avoid opening bills or reviewing card statements.
Americans are often alone experiencing these painful situations, with 58 percent telling MarketWatch that they hide their financial stress from loved ones.
Following the pandemic, Americans were hit by a cost-of-living-crisis triggered by skyrocketing inflation, which in June 2022 reached a peak of 9.1 percent—far from the Federal Reserve's goal of 2 percent.
In April, the latest data available, the consumer price index (CPI) was 3.4 percent higher than a year before and 0.3 percent higher than in March, but the overall increase was less than expected.
But while inflation has come down and appears to be continuing its downward trend, interest rates and mortgage rates remain high, keeping the cost of shelter up. Gasoline prices also shot up 2.8 percent in April, suggesting that drivers are suffering at the pump.
The price of food, on the other hand, has been declining, making groceries cheaper.
Economic problems remain high on the list of concerns troubling Americans ahead of the November presidential election.
In its latest survey, Gallup found that 36 percent of Americans thought that economic problems were the most important issue facing the country today, with 17 percent worrying about the state of the U.S. economy in general and 12 percent about the high cost of living.
Noneconomic problems, including the government (21 percent) and immigration (18 percent), were considered the most important issues facing the country by around 75 percent of Americans in May.
I've spent my career in recruitment. From May 2012 to early 2015, I worked as a recruiter for Google Access. Then, I became the head of recruiting at DoorDash and later the chief people officer at Carta, a pre-IPO equity management company for startups.
My first experience with PIPs was at DoorDash
DoorDash was the first place I encountered performance improvement plans or PIPs. They're a way of giving a low performer a chance to correct a performance problem before termination.
When I joined as the head of talent in March 2015, I was the company's 50th employee. This was a key leadership role for HR and recruiting. We were setting a company precedent for how we wanted to manage our employees.
As we started encountering low performers, we needed to figure out how to manage them. So we talked to former or current heads of HR at other companies to understand how they thought about performance management.
They said there were two ways that companies thought about PIPs — do them or don't. The HR leaders said we could either make it so everyone went on a PIP before being terminated or put no one on a PIP and give increasing feedback to lower performers.
We went the PIP route at DoorDash. In the early days, we decided that the sales team would be the only team with a formal PIP process because they were the department with the clearest metrics. It's You're either hitting your quota or you're not. Sales metrics are very black and white.
We could be very clear with somebody and say, "If you don't hit quota, this is going to be your last month of employment."
During my tenure, everybody I saw being put on a PIP got terminated either during the PIP or shortly after. My personal take is that once you get to the point of putting somebody on a PIP, the decision to terminate has already been made.
I've never seen someone survive a PIP
When I moved to Carta in 2018 as the chief people officer, we had a lot of discussions there about whether we wanted to put people on PIPs. Early on, I instituted a policy that required managers to put employees on a PIP before terminating. We did this to ensure managers delivered feedback and employees weren't surprised they were being let go.
However, as we put people on PIPs, we found them to be disingenuous and ultimately eliminated them. Instead, we terminated employees with a generous severance package. To be candid, I've never seen somebody survive a PIP.
As a company, you want to consider why you're putting someone on a PIP. Are you doing it to make the employee successful? Or to cover your ass?
PIPs are used by companies to cover their ass almost every single time because a team doesn't have enough data about performance, and managers don't do a great job of providing feedback.
Usually, companies put someone on a PIP because they're worried that the employee will be surprised by their termination without one and could take legal action. The PIP provides legal cover.
If you get put on a PIP, make the acronym stand for Paid Interview Period
If you're an employee on a PIP, you need to view it not as a "Performance Improvement Plan" but as a "Paid Interview Period" because your employment is coming to an end at that company, either very shortly at the end of the PIP or usually soon thereafter.
You should assume it's not worked out at that company and put the majority of your efforts into trying to find a new job as fast as possible. Even if you survive the PIP, you have to think about "what happens to me now?"
I have a very large community of HR leaders in my circle. I've never heard of somebody who went on a PIP and became a top performer at that company.
So even if you survive, you've been scarlet-lettered at that company. The likelihood of you getting a raise or promotion after a PIP is insanely low.
The best option for you is to find a different company where you can be successful and start with a clean slate.
You may have heard that revolutionary AI sits on old-world foundations. The supply chain churning out generative AI tools like ChatGPT has highly paid executives and researchers at the top, and at the bottom, working stiffs who toil at screens training algorithms. Between 150 million and 430 million people do such work, according to a recent World Bank estimate: They annotate images, text, and audio; create bounding boxes around objects in images and, more recently, write haikus, essays, and fictional stories to train the sophisticated tools that could eventually replace people like me.
They also exist in a kind of economic stasis. “I’ve never met a worker who would tell me, ‘This job gave me the chance to buy my house or send my kids to university,” says Milagros Miceli, a researcher at the Distributed AI Research Institute and Weizenbaum Institute who has worked with scores of data workers across the world.
Miceli recalls speaking to about a dozen data-labeling workers earning about $1.70 an hour in an Argentina slum in 2019. When she returned in 2021, none had moved on and their wages had barely increased. They were still living below the poverty line.
Workers often have to take second jobs or night shifts, says Madhumita Murgia, the AI editor of the Financial Times whose recent book Code-Dependent features their stories from across the developing world. One woman who worked for Samasource Impact Sourcing in Nairobi, for instance, couldn’t support herself and her daughter on her salary and had to move in with her parents, Murgia says.
The job itself is precarious. Another worker in Bulgaria couldn’t make rent because she was suspended from accepting paid tasks after complaining about night shifts. “You’re one step away from everything unraveling,” says Murgia. End customers are the likes of Microsoft Corp. and OpenAI, some of the most valuable firms in the world. “It’s like the factory worker in the Philippines who doesn’t realize the dress they’re stitching is going to be a $3,000 gown.”
There is also precious little of that time-honored aspiration for the developing world: upward mobility. Murgia found that data workers weren’t transitioning to higher-paying digital jobs. “They’re still confined to low-value work,” she says.
Leaders of data-labeling firms often start with noble intentions to help pull people out of poverty, but they’ve struggled to get corporate customers to pay higher rates as competition in their field has increased. As such, most data work platforms don’t have policies in place to ensure their workers earn at least the local minimum wage, according to a 2021 survey from the Oxford Internet Institute.
Take this job ad seeking “professional translators” in Igbo, Nigeria that offers up to $17 an hour to help train generative AI models. That is well below the average rate for Nigerian translators, who tend to start at $25 an hour, according to Good Firms, a client-reviews website. The ad comes from Remotasks, the main platform of San Francisco-based AI startup Scale.ai, which just raised $1 billion from investors including Amazon.com Inc. in one of the year’s largest financing rounds. Scale.ai didn’t respond to multiple requests for comment.
The company and rivals like San Francisco-based Samasource Impact Sourcing Inc., Argentina’s Arbusta S.R.L., and Bulgaria’s Humans in the Loop play a critical role in the AI supply chain, but for years now have typically paid just enough for workers to maintain a living, Murgia and Dr. Miceli say.
That may continue even as data work becomes more complex. Recently, platforms like Scale.ai have been looking for more skilled workers, including artists and people with creative-writing degrees to write short stories for training AI systems, according to instruction documents seen by Miceli. While those offer higher wages, they are still below what people with degrees should be earning.
Researchers say the appetite for such work is growing, but with few incentives to provide an equitable wage, it’s hard to see workers’ economic status improving. Training AI is already horrifically expensive due to the cost of chips and cloud computing. (Venture capital firm Sequoia Capital recently calculated that the AI industry spent $50 billion on Nvidia Corp. chips to train AI in 2023 but only made about $3 billion in revenue.)
That spells fewer opportunities for the people underpinning the AI revolution and shows yet again that the technology’s true transformative effects have been entrenching economic power.
Perhaps we can learn something from Nike Inc. Back in the 1990s, the company faced an enormous backlash for the long hours and meager wages its workers in developing nations earned. Over time, consumer boycotts and pressure from the media led Nike to put in stricter labor policies. It spent millions of dollars on improving conditions and pay.
The challenge for data workers is that their jobs are harder to visualize in the same, concrete way you can imagine a young boy sewing tennis shoes in a dimly lit warehouse, and that can make it harder for their advocates to rally support. However, tech companies should remember that poor working conditions at the bottom of their supply chain can also lead to substandard AI. That’s problematic at a time when the public is more wary than ever of buzzy models that hallucinate. The answer to that isn't rocket science: pay the data workers more and treat them better too.
Is this the worst moment for the labor movement in recent memory, or the best? That question animated a conversion I recently had with Mary Kay Henry, who just stepped down as the president of the 2-million-member Service Employees International Union, having been an organizer for 43 years and led the SEIU for 14.
Positive sentiment toward unions has surged over the past decade. Interest in joining a union has surged. Petitions to form a union have surged. And several high-profile organizing drives have succeeded: among Uber and Lyft drivers, Amazon warehouse workers, Starbucks baristas, and Volkswagen manufacturing employees, in the staunchly anti-union South, no less. For its part, the SEIU has organized thousands of hospital employees, home health aides, and child-care workers in recent years.
And yet, just 11 percent of American workers were represented by a union as of 2023—a number that has been falling. Less than 7 percent of private-sector workers have union representation, down from 17 percent in 1983. During Henry’s time leading the SEIU, membership was flat at roughly 2 million. Unions are financed by their members and are at their most influential when negotiating on behalf of those members. Is it possible to have a stronger American labor movement without having a bigger one?
Henry thinks it is, and her innovation was to extend the SEIU’s influence without expanding its ranks. A longtime strike leader, she took over as the president of the SEIU in 2010, a bleak year for organized labor and American workers in general. The Great Recession had ravaged the labor market. The union approval rate had plunged to an all-time low of 48 percent. Republican politicians had capitalized on the trend to expand and strengthen right-to-work rules that prevented unions from collecting dues from nonmembers, sapping their ability to organize.
In 2012, an SEIU local helped organize a strike among employees of fast-food restaurants in New York City: Dozens of cashiers, janitors, and cooks for Burger King, KFC, McDonald’s, Taco Bell, and Wendy’s picketed instead of working their shifts, asking for $15 an hour and a union. Soon, thousands of workers across the country were picketing and walking off the job. The SEIU was instrumental in what became known as the Fight for $15 and a Union, providing organizing capacity, media relations, and millions of dollars in support.
The campaign seemed like a long shot. The federal minimum wage was just $7.25 at the time. Then-President Barack Obama and congressional Democrats were pushing for $9 an hour. Henry recalled Tom Harkin, then a Democratic senator representing Iowa, who had proposed $10.10 an hour, asking her, “What are you doing? This is ridiculous.”
Moreover, the SEIU was spending money supporting the protests of workers who were not paying SEIU dues and had little prospect of becoming SEIU members. “There were questions inside our leadership about whether we should continue to back it,” Henry told me, noting that most members of leadership thought the answer was no. “I just had an instinct, based on listening to the workers themselves, that we needed to continue because we had to find a way to disrupt the decades-long attack on the labor movement that was unfolding.”
The “tide shifted,” Henry told me when the Fight for $15 began galvanizing workers outside the fast-food industry. Workers at airports, colleges and universities, and hospitals decided to push for union representation. It really shifted when the Fight for $15 started notching tangible policy victories. SeaTac, Washington, voted to bump its minimum wage to $15 an hour in late 2013, followed by Seattle, dozens of cities and counties, several states, and several major employers. The Obama Administration set a $ 10.10-an-hour wage floor for federal contractors early in 2014. The National Employment Law Project estimates that the Fight for $15 helped generate $150 billion in wage increases for 26 million workers. “It became a movement far bigger than our institution,” Henry told me.
“Mary Kay Henry helped revitalize the labor movement,” Obama told me in an email. “She matched a fierce intelligence and dedication to social justice with deep empathy and a sharp sense of humor, and America is stronger today thanks to her efforts. I could not have asked for a better, more creative partner.”
The Fight for $15 was not the only way the SEIU supported workers outside its ranks. In 2017, an SEIU local in Seattle—along with the nonprofits Casa Latina, Working Washington, and the National Domestic Workers Alliance—began pushing for the city to strengthen protections for nannies, housekeepers, and health aides. The city did so by passing a domestic workers’ bill of rights and setting up a standards board, composed of labor advocates, employers, and workers. Domestic workers started to get a say in minimum wages, overtime rules, and insurance policies. And they got the aid of SEIU, even though they do not have the right to unionize in the United States.
Sectoral bargaining—in which unions negotiate with many employers or even an entire industry at a time, as is common in Europe—is also barred in the United States. But standards boards like the one in Seattle, also called workers’ boards or industry councils, are legal. And more have cropped up: for farm laborers in New York, domestic workers in Philadelphia, nursing-home workers in Michigan, agricultural workers in Colorado, home-care workers in Nevada, arena workers in Detroit, and fast-food workers in California.
The SEIU is involved with many, allowing the union to “collectivize power” across unions and represent workers outside its ranks, Henry explained. For a union leader, she added, it is “kind of scary.” Unions might end up accepting concessions together that they never would have agreed to individually. They might have to reorganize internally. They might have to figure out how and what to negotiate with policymakers, not just employers. But it is also thrilling, she argued because the organizations are capable of aiding hundreds of thousands more workers than they would normally be able to. (The California fast-food council alone is writing rules for more than 550,000 workers, only a tiny sliver of whom are union members.)
She hopes that the trend continues beyond her tenure. “How do we move from an incremental-growth strategy to the kind of industrial-growth strategy that the CIO had in the 1930s?” she asked me, referring to the Congress of Industrial Organizations, a New Deal–era union federation. “We need to imagine workers that aren’t currently covered by labor law—home-care workers, child-care workers, farmworkers, everybody that was written out, and all these new jobs that have been created that nobody even imagined existing.” She added: “One of my dreams has been to have four or five unions pool resources and think about the 5 million workers in the gig sector. Instead of trying to carve them up, how do we back all of them in making demands of Uber, Lyft, and Doordash?”
Of course, that kind of creative bargaining is necessary only because traditional organizing remains so difficult in the United States. The country’s geography poses a challenge, since many workers are “dispersed” and there are not “natural congregation points,” Suresh Naidu of Columbia University told me. More importantly, more than two dozen states have right-to-work laws. Companies commonly engage in illegal anti-union tactics with impunity: closing stores in which employees are organizing, firing organizers, interfering with employees who are organizing off-hours, and delaying negotiations with pro-union workers. “Labor law in the U.S. is broken,” Henry told me. “That’s why we’ve been so dedicated to trying to find solutions where workers can organize across sectors and geographies.”
Yet doing that kind of work might be difficult if unions cannot expand their traditional ranks. Unions collect dues to pay for organizing: A union that is not growing, or in which more members are opting out of paying dues, is a union losing its traditional form of firepower. (Federal reporting forms show that the SEIU headquarters’ budget swelled and then declined during Henry’s tenure, with the Washington office collecting about $250 million a year from local unions, down from $270 million when she started.) With funds tight, members might want their union to focus on organizing and bargaining and stop advocating on behalf of unrepresented workers or spending millions on elections, as the SEIU now does. (When unions are required by law to ask members if they want their dues spent on campaigns, their political spending drops.)
Plus, when workers see wages rising everywhere, they may not feel compelled to give up part of their paycheck to a labor organization. Michael Strain, the director of economic policy studies at the American Enterprise Institute, a right-of-center think tank, performed research showing that minimum wage increases lead to reduced union membership. Unions, he told me, are in a “precarious” position if “public policy is substituting for what a union can deliver.” That said, he added, “There’s a real benefit to unions in engaging in these sorts of campaigns, because they are—I would say correctly—being perceived by a broader swath of the workforce as fighting for them.”
Other countries have shown that small unions can still have a big impact. In France, a slim share of private-sector employees are union members, but nearly all workers are covered by a collective-bargaining agreement, Naidu noted. “It means something different to be a union member in France,” he told me. “You’re much more likely to be a union activist or closer to a steward,” advocating for a broad group of workers.
Henry told me she believed that union density might begin to tick up in the United States. She pointed to the Volkswagen workers in Tennessee, who voted to form a union on their third try. She pointed to the National Labor Relations Board, whose general counsel is “for the first time in my 40 years actually trying to enforce the National Labor Relations Act on behalf of workers.” She pointed to the extraordinary enthusiasm young people have for organized labor.
But if the situation doesn’t change, the unions will have to.