The American employment landscape has significantly evolved in recent years. Previously marked by high levels of employee turnover, it has now become a market where employees prefer job stability, a phenomena that labor economists have dubbed as the “great stay.” This shift, where low levels of hiring, quitting, and layoffs are observed, is a stark contrast to the “great resignation” trend of 2021 and 2022. This change in the job market was pointed out by Julia Pollak, the chief economist at ZipRecruiter, who noted that the instability of the pandemic-era labor market is now a thing of the past.
As the country emerged from the economic slowdown caused by the Covid-19 pandemic, employers were eager to hire new workers. The job market saw an unprecedented rise in job openings, a decrease in unemployment to its lowest since the late 1960s, and the quickest wage growth in decades due to the increasing competition for skilled workers. In 2022 alone, over 50 million workers left their jobs, setting a new record and evidencing the abundance of better job opportunities elsewhere. However, the labor market has since cooled down.
Indeed’s economist, Allison Shrivastava, pointed out that the rate of people quitting their jobs has fallen below the pre-pandemic level, after peaking in 2022. The hiring rate has also experienced a slowdown, reaching its lowest since 2013, excluding the initial phase of the pandemic. Despite this, the layoff rates remain historically low. This situation, where more people are retaining their jobs amidst low layoff and unemployment rates, suggests that employers are maintaining their workforce and employees are opting to stay in their current roles.
The primary driver behind the “great stay” is the fear among employers of losing their workforce, a phenomenon ZipRecruiter’s Pollak referred to as “employer scarring.” Businesses are now hesitant to lay off employees, having experienced the struggle of hiring and retaining workers just years before. At the same time, job openings have decreased, leading to fewer resignations, reflecting workers’ confidence in finding new job opportunities.
This shift in the job market is largely due to the U.S. Federal Reserve’s efforts to control inflation by raising interest rates between early 2022 and mid-2023. This made borrowing more expensive, causing businesses to reduce their expansion efforts and hiring. Although the Federal Reserve began reducing interest rates in September, they signaled a slower rate reduction than previously anticipated.
Overall, these factors indicate a stabilizing labor market, still influenced by recent economic shocks. The “great stay” offers unprecedented job security for those currently employed, as noted by Pollak. However, it also means those seeking employment, including new college graduates or workers unsatisfied with their current jobs, will have a harder time securing work. Pollak suggests that job seekers broaden their search and consider acquiring new skills.
