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Economic Trends: Reflections on 2019, Predictions for 2020

The employment numbers published Friday, December 6th was an effective synopsis of the past year of economic growth. U.S. employers added a remarkable 266,000 jobs (a number that is still impressive even after accounting for the 50,000 employees that went back to work as a result of the end of the General Motors labor dispute).  There haven’t been any drastic revisions to previous months’ job figures, while the unemployment rate fell to a low of 3.5 percent—a rate which hasn’t been seen since 1969.

All this positive news is in sharp contrast to the gloomy economic outlook postulated last year.  Given the end-of-year jitters in the stock market and the rapid growth the labor force has experienced in the past decade, yours truly suggested that a slowdown (if not outright recession) would have likely occurred sometime in 2019. However, myself (and others) underestimated how much the economy could grow without inflationary impacts.

Given that there still seems to be much more latent potential in the U.S. workforce than what conventional wisdom suggested, we wanted to revisit last year’s analysis to see which jobs are continuing to contribute to this period of unprecedented employment levels. We also wanted to highlight some industries that will likely see further growth into 2020 based on hot jobs as indicated by PayScale salary survey completions in 2019.

Consumer Spending is Diversifying the Labor Force

Last year, 6 out of the top 10 fastest growing jobs within PayScale’s employee survey data were all in technology, but this year we found a much more diverse set of job titles popping up in the data across a broad spectrum of industries.

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One reason for this change is likely due to the fact that certain occupations (primarily tech and finance) have seen significant wage growth. This allows workers in those occupations to have much more discretionary income, which in turn has broad impacts across the wider U.S. economy. For example, a single tech worker is estimated to support 5.7 additional jobs throughout the economy via direct and indirect multiplier effects. Tech workers create a higher demand for more goods than the average American (such as bigger homes, eating out more, more Uber trips etc.) due to their increased purchasing power. These spending habits create a demand for jobs in other industries and that demand shows up in the PayScale survey data.

We found that Foreman grew 195 percent in the past year, which makes sense given that we are currently in the midst of a residential housing boom. Another interesting job title that is reflective of increased consumer spending was personal shopper, which grew 151 percent in the past year. This suggests that the customer base is growing for  personal shopping companies such as Trunk Club, Stitch Fix or Shipt (and a further indicator that the gig economy is becoming more pronounced in the average Americans’ day to day lives). Similarly, fast food worker jumped 121 percent in the data over the past year — indicative of more Americans eating out thanks to having more disposable income available.

Tech Workers are Transforming Non-Tech Industries

Other fast-growing occupations are in industries that are being revolutionized by digital transformation. Software engineers, data scientists and data engineers are still prominent in our survey (176 percent, 122 percent and 119 percent job growth respectively). These occupations are not just tied to the technology industry. In our home city of Seattle, only an estimated 53.4 percent of tech workers work at tech firms. The proliferation of tech workers into industries outside of the tech sector is a major contributor to continued job growth nationwide.  Based on a combination of industry expert knowledge, data on the fast- growing jobs, and data on skills seeing the largest pay increase in recent months, some industries that we think will most benefit from this development include:

  • Construction
  • Energy & Utilities
  • Finance & Insurance
  • Health Care
  • Real Estate
  • Retail

One prominent example of this transformative partnership with technology are financial technology, or FinTech, whose products marry financial tools and technological innovation to help solve unique consumer problems. Some novel approaches include peer-2-peer lending platforms (which initially allowed for cash rich individuals to lend to others) and are now much more diversified in their product offerings. These platforms now allow for much more flexible personal loans and mortgages (in fact I used a FinTech firm for a recent home purchase). These firms still require the same kinds of job titles of traditional finance firms, but the growth for finance titles such as wealth advisor (142 percent growth) and technology titles such as product owner (121 percent growth) are driven by a boom in the FinTech space more than traditional financial firms.

Job Growth has been Unequal

Despite the positive economic news this past year, not everyone has been a winner. An interesting quirk of PayScale’s survey is that sometimes it’s possible to pick up negative economic projections in the form of more survey respondents across job sectors with a poor outlook. We found this to be especially true in transportation and manufacturing jobs which appeared often within the survey over the past year but aren’t growing industries.

Within our survey, we found tanker truck drivers to have grown an impressive 120 percent, but the transportation sector is at an economic crossroads. Many truckers are facing bankruptcy as spot prices for freight shipping have fallen dramatically in the past year.  The current industry climate suggests that transportation companies are facing labor shortages, significant competition and a decline in the closely-tied manufacturing sector — a job family that also showed up a lot in the data despite being in bad shape economically.

Manufacturing jobs such as a manufacturing production lead and assembly supervisor both grew 131 and 121 percent respectively within PayScale’s survey. However, overall manufacturing job numbers have slumped alarmingly over the past year, particularly in the Midwest. Furthermore, American manufacturers reported a steady decline in new orders throughout 2019, which is a traditional red flag indicating a looming recession.

Why are we seeing an increase in survey responses for the transportation and manufacturing job sectors if those sectors are doing poorly? The likely reason is that workers in those sectors want to know if it’s just their pay that is low for their current job or if the whole industry is lagging. Unfortunately, for those workers it’s almost certainly the latter.

A Recession isn’t Inevitable, but a Slowdown is Likely

It’s unlikely that manufacturing jobs will rebound anytime soon given outsourcing, automation and the extremely volatile nature of U.S. trade talks with China and the imposition of punitive tariffs across a wide variety of goods from around the world. While America has yet to be affected in terms of GDP growth, global growth has started to stall in 2019 and the effect of a trade war for the past year and a half will continue to damage the U.S. manufacturing sector and shake business confidence.

It is also interesting to note that a continued slowdown in manufacturing amplifies the likelihood of default in corporate debt, which is currently at 50 percent of U.S. GDP. This level of debt makes companies much more vulnerable to shocks such as slowing sales or higher labor costs, which in turn can lead to bankruptcy.

The U.S. will almost certainly dodge a recession if only because the Federal Reserve is now preemptively cutting rates to prevent an economic downturn. Due to the coming 2020 election, it is likely that the President will continue to pressure the Federal Reserve to cut rates to ensure a growing economy while on the campaign trail. However, an uncertain global economic climate and uncertain trade deals will certainly impact American firms that depend on trade throughout the next year. Like the highly paid tech worker, those global impacts will likely cause a ripple effect throughout the economy in 2020.

Methodology

2019 Retrospective: To provide insight into the hottest jobs of 2019, we looked at the jobs where we observed the largest growth in data collection over the last year. Our data tends to trend with what is popular in the market. Therefore, jobs where we observe a spike in data collection can be considered especially popular in the labor market, as well as competitive when it comes to pay. For this retrospective, we excluded jobs with thin data, as well as executive jobs from this list. For each job on the list, we also provided national median pay values. This sample is comprised of 12,620 respondents.

2019 Hot Job areas:

Last year, we reported on in-demand job and skill areas that would likely see growth in 2019. Here, we provide the median salary and wage growth for jobs in these areas. We expect these job areas to continue to increase in demand in 2020. These job areas are:

  • Cloud computing
  • Artificial intelligence
  • Big data
  • Cyber security
  • Virtual / augmented reality
  • Digital marketing
  • Cannabis / marijuana

2020 Look Ahead: Using a combination of industry expert knowledge, data on the fast-growing jobs, and data on skills seeing the largest pay increase in recent months, we believe the following industries will be in demand in 2020:

  • Finance
  • Healthcare
  • Energy
  • Retail
  • Construction
  • Real Estate

For each job area, we provide the top 5 most common job titles in each industry, along with its associated national median pay and wage growth. We also provide the top 5 jobs in each industry with the highest wage growth, along with their median pay. We have excluded executive jobs in this sample.

Definitions:

Total Cash Compensation (TCC): TCC combines base annual salary or hourly wage, bonuses, profit sharing, tips, commissions, and other forms of cash earnings, as applicable. It does not include equity (stock) compensation, cash value of retirement benefits, or value of other non-cash benefits (e.g., healthcare).

Median Pay: The median pay is the national median (50th percentile) annual total cash compensation for the needed jobs. Half the people doing these jobs earn more than the median, while half earn less. This measure is not used in the ranking.

Growth in 2019: We first determined how much data we collected in a given job over two 2-year periods. We then calculated the growth in 2019 as the percentage difference between these two samples and provided the 30 jobs who have experienced the most growth in data collection over the past year. A value of 100% would mean we ended the year with twice as much data as we started the year, signaling the supply of workers in this job increased significantly.

Sudarshan Sampath
Read more from Sudarshan

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