The U.S. labor market has seen a significant evolution over the past few years, transitioning from an era defined by high employee turnover to one marked by stable retention rates. This shift stems from the “great resignation” phenomenon that was especially notable in 2021 and 2022, which has since given way to what analysts are dubbing the “great stay.” This new landscape is characterized by reduced hiring, fewer layoffs, and an overall decrease in workforce mobility. Understanding these trends is crucial for both employers and job seekers navigating this complicated environment.
The concept of the “great stay” reflects the current job market dynamics, as companies have significantly adjusted their hiring practices in the wake of recent economic upheavals. Julia Pollak, ZipRecruiter’s chief economist, articulates how the initial post-pandemic frenzy that saw historic job openings and remarkably low unemployment has moderated. The surge in resignations, where over 50 million employees left their jobs in 2022 seeking improved opportunities, has simultaneously led to a newfound sense of job security among those who remain employed.
However, the once feverish quits rate—a measure of job-switching—has recently dropped below pre-pandemic levels, underscoring a considerable shift in employee sentiment. As the labor market cools, the rate of new hires plummets to lows not seen since 2013 (excluding the immediate pandemic period). Surprisingly, despite lower hiring rates, layoffs have not increased correspondingly, indicating that businesses are hesitant to let go of their workforce after experiencing earlier challenges in recruitment and retention.
Several factors contribute to this employment stability, with “employer scarring” being a key element. Pollak highlights that employers are now more cautious and reluctant to shed workers, given their recent difficulties in building teams. This cautious approach reflects a broader understanding that in a competitive talent market, the cost of losing employees may outweigh the immediate benefits of layoffs, further incentivizing companies to retain their current employees.
On the other hand, external economic conditions, particularly the Federal Reserve’s policies to address inflation, have also played a significant role in this landscape. Between early 2022 and mid-2023, the Fed’s increases to interest rates aimed at controlling inflation led businesses to reduce expansion plans significantly. As borrowing costs soared, companies scaled back hiring initiatives, an action that inevitably decreased the number of available job opportunities.
For job seekers, this environment presents a mixed bag of challenges and opportunities. While those currently employed might enjoy unparalleled job security, the landscape for new job hunters—including fresh graduates and those looking to switch careers—remains somewhat bleak. Pollak’s advice for those dissatisfied with their current roles emphasizes the importance of broadening their search radius and acquiring new skills to enhance employability in a tightening job market.
These recommendations are not merely aspirational; they encapsulate a practical approach to navigating the difficulties posed by the current economic climate. Companies may be less willing to part ways with their existing employees, but those who can adapt their skill sets will find it easier to pivot into new roles when opportunities arise.
The U.S. job market’s transition from the “great resignation” to the “great stay” highlights the intricate balance between employee retention and hiring practices. As businesses prioritize stability post-pandemic, understanding the factors influencing this dynamic is essential for both employers and job seekers. For the former, fostering an environment of engagement and retaining talent will be paramount. For the latter, a proactive attitude towards skill development and job searching will be necessary to thrive in this evolving landscape. As the labor market continues to stabilize, the lessons learned during recent economic shocks will undoubtedly shape future employment trends.