Key Points

• The US labor market is experiencing a low rate of layoffs but also a slow pace of hiring among employers.
• This comes amid signs of overall labor market strength: unemployment is historically low, for example.
• This means that while employers are retaining workers, job seekers are having a tough time.

The U.S. labor market has been stagnant lately, a dynamic that contains both good and bad news for American workers.

On the one hand, companies are retaining their existing workforce, meaning employees are unlikely to lose their jobs, economists said. But it may also be difficult for job seekers to land new jobs as employers scale back hiring, economists said.

It is a “low-hiring, under-fire environment,” Bank of America economists wrote in a research note on Friday.

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

That news may be disappointing for many workers: About half, or 51%, of American employees were looking for a new job as of Nov. 1, the highest share since 2015, according to a Gallup poll released Tuesday. Overall job satisfaction has fallen to an all-time low, it found.

The ‘great resignation’ became the ‘great stay’

By many measures, the labor market is strong for American workers.

The unemployment rate, which was 4.2% in November, is near historic lows dating back to the late 1940s. The layoff rate in October was also at its lowest level since the early 2000s, when record-keeping began, and has barely changed since 2021.

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

The current lack of dynamism in the labor market is a blow for many workers, said Julia Pollak, chief economist at ZipRecruiter.

Workers left their jobs at a dizzying pace in 2021 and 2022, as the U.S. economy woke up from pandemic-era hibernation. Job openings soared to record levels and companies competed for labor by raising wages at the fastest pace in decades, incentivizing workers to leave their jobs in search of better opportunities.

This era, called the “great quit,” has been replaced by the “great stay,” Pollak said.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 companies have been scarred by their recent experience of retaining workers amid fierce job competition and have reacted with a “labor grab,” said Cory Stahle, an economist at the job site Indeed.

Employers have oriented their policies more toward retention and less toward recruiting, Pollak said.

The labor market has also gradually cooled.

The US Federal Reserve aggressively raised borrowing costs starting in 2022 to slow the economy and control inflation, putting brakes on the labor market. The central bank began cutting interest rates in September, when inflation slowed significantly and the labor market raised some warning signs.

A ‘diverging’ labor market

While strong as a whole, the labor market is “divergent” for workers, Stahle said.

Overall job growth has been “solid,” but most of the job gains are occurring in a handful of industries such as health care, government and leisure and hospitality, Stahle said.

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

Hiring may pick up if the Federal Reserve continues to cut interest rates, as employers may be more inclined to invest more in their businesses if borrowing costs are lower, economists said.

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

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

“People who really want to get out [of their job] may need to broaden their search, broaden their parameters and get a little uncomfortable and retrain,” Pollak said.

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