‘Low-hire, low-fire’: The U.S. job market is stagnant right now, economists say

The U.S. job market has been stagnant of late, a dynamic that contains both good and bad news for U.S. workers.

On the one hand, businesses are holding on to their existing workforce, meaning employees are unlikely to lose their jobs, economists said. But it also may be hard for jobseekers to land a new gig as employers pull back on hiring, economists said.

It’s a “low-hire, low-fire environment,” Bank of America economists wrote in a research note Friday.

“The labor market is currently characterized by a lack of churn: soft hiring and low layoffs,” they said.

That news may be disappointing for many workers: About half, or 51%, of U.S. employees were seeking a new job as of Nov. 1, the highest share since 2015, according to a Gallup poll published Tuesday. Overall job satisfaction has dipped to a record low, it found.

By many metrics, the job market is strong for American workers.

The unemployment rate — which was 4.2% in November — is near historical lows dating to the late 1940s. The layoff rate in October was also at its lowest since the early 2000s, when record keeping began, and has hardly budged since 2021.

However, employer hiring in October was sluggish: The hiring rate was at its lowest since 2013. The average duration of unemployment ticked up to 23.7 weeks in November, from 19.5 weeks a year earlier.  

The current lack of dynamism in the job market represents whiplash for many workers, said Julia Pollak, chief economist at ZipRecruiter.

Workers quit their jobs at a torrid pace in 2021 and 2022, as the U.S. economy awoke from its pandemic-era hibernation. Job openings ballooned to record highs and businesses competed for labor by raising wages at the fastest clip in decades, incentivizing workers to leave their gigs for better opportunities.

This era, dubbed the “great resignation,” has been replaced by the “great stay,” Pollak said.

This is due to a variety of factors, labor economists said.

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Many businesses were scarred by their recent experience of holding onto workers amid fierce labor competition and have reacted by “labor hoarding,” said Cory Stahle, an economist at the job site Indeed.

Employers have shifted their policies more toward retention and away from recruiting, Pollak said.

The labor market has also gradually cooled.

The U.S. Federal Reserve raised borrowing costs aggressively starting in 2022 to slow the economy and tame inflation, which applied the brakes on the job market. The central bank started cutting interest rates in September, as inflation declined significantly and the labor market flashed some warning signals.

While strong in the aggregate, the job market is “diverging” for workers, Stahle said.

Overall job growth has been “robust” but the bulk of job gains are occurring in a handful of industries like health care, government, and leisure and hospitality, Stahle said.

Meanwhile, job growth in white-collar fields like software development, marketing, and media and communications “has been very, very slow,” he said. “Right now your experience with the labor market will depend on the type of job you’re doing,” he said.

Hiring may bounce back if the Fed continues to cut interest rates, as employers may be more inclined to invest more in their businesses if borrowing costs are lower, economists said.

In the meantime, “things are going to be a little more competitive than they were a couple years ago,” Stahle said.

Job seekers should be sure to align their resumes with the skills that employers list on job posts, especially since many businesses use “applicant tracking systems” to automatically screen applications, he said.

“People who really want out [of their job] may need to widen their search, expand their parameters, and get a bit uncomfortable and reskill,” Pollak said.

But those with jobs they really like “have unprecedented job security,” she said.