In recent years, the U.S. labor market has experienced a significant shift from one marked by record-high employee turnover to one with low churn.
To put it briefly, the “great resignation” of 2021 and 2022 has given way to what some labor economists refer to as the “great stay,” a labor market characterized by low hiring, quits, and layoffs.
“The pandemic-era labor market’s volatility is becoming more and more of a thing of the past,” stated Julia Pollak, chief economist at ZipRecruiter.
How the job market has changed
When the U.S. economy emerged from its Covid-induced hibernation, employers swooned to hire. As companies fought for talent, job postings reached all-time highs, unemployment dropped to its lowest level since the late 1960s, and incomes soared at the quickest rate in decades.
Attracted by better and more plentiful job possibilities abroad, almost 50 million workers left their occupations in 2022, shattering a record set just the year before.
But the labor market has been steadily cooling.
According to Indeed economist Allison Shrivastava, the quit rate is “below what it was prior to the commencement of the pandemic, after hitting a feverish peak in 2022.”
With the exception of the early stages of the pandemic, hiring has decreased to its lowest level since 2013. Layoffs, however, remain modest by historical standards.
According to Shrivastava, this trend—more workers remaining in their existing positions despite low unemployment and layoff rates—”points to companies holding on to their workforce combined with more employees staying in their current occupations.”
Big causes for the great stay
According to Pollak of ZipRecruiter, one of the main causes of the so-called great stay is employer “scarring.”
After having difficulty hiring and retaining employees only a few years ago, businesses are reluctant to fire employees now.
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More money is being invested in 401(k)s by investors.
However, there have been fewer job opportunities, which has decreased the number of quits, a sign of employee confidence in finding a new job. Another major cause of this dynamic is the U.S. Federal Reserve’s effort to control excessive inflation by raising interest rates between early 2022 and mid-2023, according to Pollak.
According to her, as borrowing costs increased, companies resisted expanding and starting new projects, which resulted in fewer employees. The Fed began lowering interest rates in September, but following its most recent rate decrease on Wednesday, it gave a hint that it will go more slowly than initially anticipated.
According to Indeed’s Shrivastava, overall patterns point to a “stabilizing labor market, yet one nonetheless molded by the lessons of previous shocks.”
Americans with jobs have “extraordinary employment stability” as a result of the great recovery, according to Pollak.
However, people who are looking for work, such as recent college graduates and employees who are unhappy in their current position, will probably have a difficult time finding a job, according to Pollak. She suggests that they broaden their search and even attempt to pick up new talents.
