The U.S. job market is experiencing a significant shift that has evolved dramatically from the previous years marked by high employee turnover. The phenomenon known as the “great resignation” — when millions of workers voluntarily left their jobs in 2021 and 2022 — has transitioned into what labor economists are now identifying as the “great stay.” The overall landscape for employment has levelled off, revealing a stagnation in hiring, resignations, and layoffs. Julia Pollak, chief economist at ZipRecruiter, encapsulates this transformation by indicating that the helter-skelter shifts experienced during the pandemic are receding into the past.
As the economy tentatively reopened following the strict times of COVID-19 restrictions, hiring surged. With this resurgence, job vacancies climbed to unprecedented levels, accompanied by a decline in unemployment rates that mirrored trends last seen in the late 1960s. Employers competed ferociously for talent, resulting in wage growth not witnessed in decades. In 2022 alone, over 50 million workers chose to resign, lured by enticing alternative job opportunities. However, as the labor market continues to cool, a contrasting picture now emerges.
Recent data indicates that the resignation rate has dipped below pre-pandemic levels after reaching an unsustainable high in 2022. Economists, including Allison Shrivastava from Indeed, report that hiring rates have reached their lowest levels since 2013, excluding the initial phase of the pandemic. Despite this slowdown, historical comparisons show that layoffs remain significantly low. The current work climate highlights a tendency for employees to prioritize job stability, coupled with employers’ inclination to retain their workforce during uncertain economic times.
Pollak identifies “employer scarring” as a critical factor contributing to this trend. Businesses, having faced enormous challenges in recruiting and retaining staff in recent years, are hesitant to downsize their workforce, fearing another labor shortage. This shift reflects a broader understanding of the tumultuous employment landscape and the lessons learned from the challenges of the pandemic.
While the “great stay” has imparted a sense of unprecedented job security for those currently employed, it poses new challenges for job seekers, particularly for recent graduates and individuals looking for career changes. The dip in job vacancies can lead to a perception of dwindling opportunities, making it more difficult for these individuals to secure ideal positions. Pollak emphasizes the value of expanding job searches and acquiring new skills as essential strategies for overcoming these challenges.
Additionally, the Federal Reserve’s monetary policy plays a crucial role in this labor market adjustment. Following a series of interest rate hikes aimed at controlling inflation from early 2022 through mid-2023, the costs of borrowing have significantly impacted business expansion plans. Companies have pulled back on hiring in anticipation of economic volatility, leading to a tighter job market for potential candidates.
Despite the recent reduction in interest rates, the Fed has signaled a cautious approach in further easing, which suggests the labor market may stabilize but remain shaped by past disruptions. Overall, these dynamics illustrate an important intersection between economic policy and labor market behavior, entwining job seekers’ prospects with macroeconomic trends.
As the U.S. job market navigates this transitional phase, both employers and employees must adapt to the new realities. For employers, the focus should be on talent retention and investment in employee development to prevent future crises in hiring. Meanwhile, job seekers should remain adaptable, seeking out opportunities for skill enhancement and being open to diverse roles.
The current labor market, characterized by low turnover, suggests that the days of employee mobility and freedom may be somewhat tempered. Recognizing the balance between job security and the need for professional advancement is crucial for those employed and seeking new opportunities. The “great stay” serves as a reminder of the evolving nature of work and the need for individuals to remain agile in an ever-changing landscape.