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The U.S. labor market has undergone a dramatic transformation in recent years, from a market characterized by record employee turnover to a market with low turnover.
In short, the “Great Retreat” of 2021 and 2022 has morphed into what some labor economists call the “Great Stay,” a labor market with low hiring, layoffs and layoffs.
“The turmoil in the pandemic-era labor market is increasingly fading into the background,” said Julia Pollak, chief economist at ZipRecruiter.
How the job market has changed
Employers rushed to hire new workers as the U.S. economy rebounded from its Covid-induced slump. Job openings rose to historic levels, unemployment fell to its lowest level since the late 1960s and wages rose at their fastest pace in decades as companies competed for talent.
More than 50 million workers quit their jobs in 2022, breaking a record set last year, lured by better and more extensive job opportunities elsewhere.
However, the labor market gradually cooled down.
The churn rate is “below what it was before the pandemic began, after reaching a feverish peak in 2022,” said Allison Shrivastava, an economist at job site Indeed.
Hiring has fallen to its lowest level since 2013, excluding the early days of the pandemic. However, the number of layoffs is still low by historical standards.
This dynamic — more people staying in their jobs despite low layoffs and unemployment — “suggests that employers are holding on to their workforce while more workers are staying in their current jobs,” Shrivastava said.
Big reasons for the great stay
According to ZipRecruiter's Pollak, employer “scarring” is a key reason for the so-called “Great Stay.”
Companies are currently reluctant to lay off workers, having struggled to recruit and retain workers just a few years ago.
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However, job vacancies have declined, which has reduced the number of layoffs, which is a measure of workers' confidence in finding new employment. This momentum is largely due to another factor: the Federal Reserve's campaign between early 2022 and mid-2023 to raise interest rates to curb high inflation, Pollak said.
It has become more expensive to borrow, which has caused companies to scale back expansion and new ventures and, in turn, hire fewer people, she said. The Fed began cutting rates in September, but signaled after its latest rate cut on Wednesday that it would cut rates more slowly than previously forecast.
Overall, the dynamics point to a “stabilizing labor market, but still informed by the lessons of recent shocks,” Indeed's Shrivastava said.
The great stay means Americans with a job have “unprecedented job security,” Pollak said.
But those looking for a job — including new college graduates and workers who are dissatisfied with their current roles — will likely have a hard time finding a job, Pollak said. She recommends they broaden their search and perhaps try learning new skills.