In recent years, the landscape of the U.S. job market has dramatically altered, transitioning from an era marked by significant employee turnover to a phase of stability and retention, often referred to as the “great stay.” The period following the pandemic, specifically the “great resignation” witnessed in 2021 and 2022, showcased a surge of employees willingly leaving their positions in search of better opportunities. However, as these trends have shifted, the current job market reflects a contrasting scenario of minimal job movement, characterized by low hiring rates and infrequent layoffs.
Julia Pollak, the chief economist at ZipRecruiter, aptly describes this transformation, indicating that “the turbulence of the pandemic-era labor market is increasingly in the rearview mirror.” This statement encapsulates the prevailing sentiment among labor economists concerning the growing stability in employment patterns as the economy recovers from the pandemic’s turmoil.
During the post-pandemic recovery, a fervent demand for labor arose when businesses sought to fill vacancies as the economy reopened. The demand for workers reached unprecedented heights, leading to a historic surge in job openings and an unprecedented drop in unemployment rates, touching levels not observed since the late 1960s. As companies competed aggressively for talent, wages experienced rapid growth, escalating at a pace not seen in decades. Notably, over 50 million workers opted to resign from their positions in 2022, surpassing the previous year’s record—an indication of the vast array of job opportunities available.
However, this exuberance was not to last. As market dynamics began to cool, the rate at which employees resigned from their jobs saw a decline; it eventually dropped below pre-pandemic levels post-2022’s highs. Allison Shrivastava from Indeed underscores this cooling trend, pointing out that hiring rates have plummeted to levels not experienced since 2013, with the notable exception being the initial stages of the pandemic.
Now, despite the reduction in job openings, layoffs remain remarkably low from a historical perspective. This paradox illustrates a significant shift—more employees are choosing to remain in their roles, amidst a backdrop of low unemployment and even lower rates of workforce attrition. Pollak identifies “employer scarring” as a critical factor contributing to this stability. Many companies, having faced challenges in hiring during the recent labor shortage, now exhibit a cautious approach towards layoffs.
This protective stance from employers is not without consequences. With a decrease in job openings and a decline in the quits rate, worker confidence in their ability to secure alternative employment has diminished. Those seeking new opportunities are now constrained by fewer available positions, a stark contrast to the market dynamics that prevailed during the height of the great resignation.
Compounding these changes is the U.S. Federal Reserve’s aggressive monetary policy aimed at combating inflation from early 2022 through mid-2023. The hiking of interest rates has resulted in increased borrowing costs, dissuading businesses from expansion and curbing hiring efforts. As the Federal Reserve has recently begun to lower interest rates, there remains caution about the pace of these reductions, reinforcing the overall climate of uncertainty in the labor market.
Despite these challenges, the current state of the job market implies a degree of security for those who are employed. Pollak suggests that while job retention is high, new entrants into the workforce—including recent graduates and those unsatisfied in their current roles—face significant hurdles in their job search. As a response, she encourages these individuals to broaden their search parameters and consider upskilling to enhance employability.
The transformation of the U.S. job market from the turbulence of the great resignation to the stability of the great stay highlights a complex interplay of factors affecting employment. While current conditions have afforded job security to many workers, the environment remains challenging for those seeking new roles. The landscape of work continues to evolve, driven by recent economic changes and the lessons learned amidst a pandemic, suggesting that adaptability will be crucial for both job seekers and employers moving forward.