The US job market is experiencing an unusual phase where workers are benefiting from rising wages and minimal layoffs, but job seekers are finding it increasingly difficult to secure new positions.
Hiring rates have hit their lowest level in over a decade, creating a labor market that is largely stuck in place.
This static job market stems from a cautious approach by employers who are hesitant to make major changes to their workforce. Companies fear they could be unprepared if the economy either speeds up or slows down unexpectedly. As a result, many businesses are choosing not to expand their payrolls, while workers, sensing limited opportunities, are staying put rather than risking a job switch.
The hiring rate fell to 3.3% in August, the slowest since October 2013, according to the latest data from the Job Openings and Labor Turnover Survey (JOLTS). At the same time, layoffs remain low, holding steady at 1%, while the rate of workers voluntarily quitting their jobs has slowed to levels not seen since 2015, apart from the early pandemic plunge.
This decline in job mobility contrasts sharply with the post-pandemic “Great Resignation” of 2021, when workers changed jobs frequently to secure better pay. That trend has largely come to an end as fewer positions are available, and competition for open roles has intensified.
Recent years have seen significant wage growth for those who switched jobs. In 2022, job-switchers enjoyed salary increases up to 8 percentage points higher than those who stayed with their employers. However, the difference has now narrowed to just 1.9 percentage points. As employers pull back on hiring, the “premium” for switching jobs has diminished, and fewer workers are taking the leap.
Economists point to a combination of factors contributing to the job market slowdown, including rising interest rates, economic uncertainty, and a cooling labor demand. In industries like construction, where job openings surged temporarily due to specific factors like natural disasters, overall hiring is still down compared to earlier peaks.The Big Picture
This job market stasis signals a broader trend of reduced dynamism. The rapid turnover and hiring seen in recent years proved unsustainable, and businesses are now focusing on stabilizing their workforces rather than continuously training new employees. For workers, this means fewer opportunities to advance their careers or move to higher-paying positions.
“What this shows is a trend of less dynamism in the labor market,” noted ADP Chief Economist Nela Richardson.
Richardson indicated that both businesses and workers are adopting a more cautious approach as the economy slows.
The labor market’s current state raises questions about its future direction. Will hiring eventually rebound, or could layoffs begin to rise? Much will depend on how the economy evolves in the coming months and how employers respond to changing conditions.
For now, dissatisfied workers may have to “hang tight” in their current roles, as job opportunities remain scarce. While the labor market’s slowdown has helped temper inflation and allowed the economy to cool without triggering mass layoffs, it leaves workers and employers in a state of uncertainty.
Axios, Construction Dive, and Inc. contributed to this report.
