Over the past few years, the U.S. job market has witnessed a significant evolution, transitioning from a phase marked by unprecedented employee turnover to a more stable environment. The phenomena colloquially dubbed the “Great Resignation,” which saw a record number of employees voluntarily leaving their jobs during 2021 and 2022, has now pivoted to what some analysts are calling the “Great Stay.” This new dynamic is characterized by lower rates of hiring, resignations, and layoffs, leading to a notably different employment landscape.
In essence, what we are observing is a resurgence of caution among employers and employees alike. Julia Pollak, a leading economist at ZipRecruiter, encapsulates this transformation, asserting that the disruptive labor market turmoil induced by the pandemic is likely fading into history. Following the reopening of the economy post-COVID, businesses rushed to fill vacancies, resulting in a surge of job openings and a decrease in unemployment rates. This demand for labor drove wages to increase at a rate not seen in decades, as companies found themselves competing for a limited pool of skilled workers.
Record Volatility and Its Aftermath
In 2022 alone, over 50 million American workers decided to leave their jobs, outpacing the previously set records. Many were lured by the promising availability of better opportunities in the job market. However, as we move into today’s labor climate, the situation has shifted dramatically. The rate at which employees are quitting their jobs has dipped below pre-pandemic levels, according to Allison Shrivastava from Indeed. Moreover, hiring has reached its lowest point since 2013, with exceptions made for the earliest days of the pandemic.
Interestingly enough, the notable decline in turnover has not been accompanied by an uptick in layoffs. This nuanced situation reflects a broader trend: employers are hesitant to let go of their workforce given the recent history of challenges surrounding hiring and retention. The concept of “employer scarring,” a term coined by Pollak, highlights the psychological hesitance stemming from the struggles businesses faced just a short while ago. The pandemic essentially changed the employer-employee relationship, leading to a newfound appreciation for workforce stability.
The drop in job openings—a critical factor influencing quitting rates—can be traced to economic policies initiated by the U.S. Federal Reserve starting in early 2022. To combat soaring inflation, the Fed raised interest rates, which made borrowing more costly. This strategy prompted businesses to curtail their expansion plans and, hence, their hiring ambitions. Although the Fed began reducing interest rates in September, it also signaled a careful approach going forward, indicating that rapid cuts could be a thing of the past.
This careful balance has profound implications on the job market. As rates stabilize and employers remain cautious, we find ourselves in a situation where the U.S. labor market is beginning to stabilize in the midst of a myriad of economic pressures. Shrivastava aptly notes that while the labor market is stabilizing, it is still influenced by the lessons learned from the recent past.
For those currently employed, this evolving landscape translates to an era of unprecedented job security, as Pollak suggests. However, this security comes at a cost for job seekers—especially recent graduates or those unhappy in their current roles—who will find themselves navigating a challenging job market. The influx of new graduates is competing for positions in an environment dominated by employees who have chosen to remain in their current jobs.
To better position themselves, potential applicants might consider broadening their job search and acquiring new skills. By doing so, they can enhance their appeal in a competitive job market that sends mixed signals about opportunities and security.
The transformation of the U.S. job market from the whirlwind of the Great Resignation to the more tempered Great Stay represents a crucial shift impacted by a multitude of factors. Averages and trends reveal that while job security for many has increased, the path to employment for new entrants will require adaptability and resilience. As businesses learn to maneuver within this newfound stability, job seekers will do well to stay informed and prepared for the evolving dynamics that characterize the contemporary labor landscape.