Personal Finance
Job seekers are sour on the cooling labor market
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Workers are souring on the state of the job market.
Job seeker confidence in Q2 2024 fell to its lowest level in more than two years, according to a quarterly survey by ZipRecruiter, which has tracked the metric since Q1 2022. That decline suggests workers are more pessimistic about their ability to land their preferred jobs.
Workers had reason for euphoria two to three years ago: The job market was red-hot and, by many metrics, historically strong.
It has remained remarkably resilient even in the face of an aggressive interest-rate-hiking campaign by U.S. Federal Reserve to tame high inflation.
However, the labor market has slowed gradually. Workers are now having a harder time finding jobs and the labor market, while still solid, could be in trouble if it continues to cool, economists said.
“There actually now is reason in the data to understand why job seekers are feeling kind of gloomy,” said Julia Pollak, chief economist at ZipRecruiter. “The labor market really is deteriorating and jobseekers are noticing.”
Demand for workers surged in 2021 as Covid-19 vaccines rolled out and the U.S. economy reopened broadly.
Job openings hit record highs, giving workers ample choice. Businesses competed for talent by raising wages quickly. By January 2023, the unemployment rate touched 3.4%, its lowest level since 1969.
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Workers were able to quit their jobs readily for better, higher-paying ones, a period that came to be known as the great resignation or the great reshuffling. More than 50 million people quit in 2022, a record high.
The U.S. economy was able to avoid the recession that many economists had predicted even as inflation declined significantly. However, many Americans still felt downbeat on the economy, a so-called “vibecession” — a sentiment that persists despite the overall economy’s relative strength.
Many job metrics have fallen back to their rough pre-pandemic levels, however. The rate of hiring by employers is at its lowest since 2017.
“The postpandemic excesses of the U.S. job market have largely subsided,” Preston Caldwell, senior U.S. economist for Morningstar Research Services, recently wrote.
The unemployment rate has also ticked up to 4.1% as of June 2024. While that rate is “consistent with a strong labor market,” its steady rise is the “troubling factor,” Nick Bunker, economic research director for North America at the Indeed Hiring Lab, wrote in early July.
The labor market’s broad readjustment has been “mostly welcome” as it comes back into its pre-pandemic balance, Bunker said. But any further cooling “is a riskier proposition,” he said.
“For now, the labor market remains robust, but the future is uncertain,” he wrote in early July after the federal government’s latest batch of monthly jobs data. “Today’s report shows the temperature of the labor market is still pleasant, but if current trends continue the weather could get uncomfortably cold.”
Worker sentiment could rebound if and when the Fed starts cutting interest rates, which could help households by reducing borrowing costs, Pollak said.
“People seize on good news and get very excited,” she said.
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The U.S. job market has undergone a dramatic transformation in recent years, from one characterized by record levels of employee turnover to one in which there is little churn.
In short, the “great resignation” of 2021 and 2022 has morphed into what some labor economists call the “great stay,” a job market with low levels of hiring, quits and layoffs.
“The turbulence of the pandemic-era labor market is increasingly in the rearview mirror,” said Julia Pollak, chief economist at ZipRecruiter.
How the job market has changed
Employers clamored to hire as the U.S. economy reopened from its Covid-fueled lull. Job openings rose to historic levels, unemployment fell to its lowest point since the late 1960s and wages grew at their fastest pace in decades as businesses competed for talent.
More than 50 million workers quit their jobs in 2022, breaking a record set just the year prior, attracted by better and ample job opportunities elsewhere.
The labor market has gradually cooled, however.
The quits rate is “below what it was prior to the start of the pandemic, after reaching a feverish peak in 2022,” said Allison Shrivastava, an economist at job site Indeed.
Hiring has slowed to its lowest rate since 2013, excluding the early days of the pandemic. Yet, layoffs are still low by historical standards.
This dynamic — more people stay in their jobs amid low layoffs and unemployment — “point to employers holding on to their workforce along with more employees staying in their current jobs,” Shrivastava said.
Big causes for the great stay
Employer “scarring” is a primary driver of the so-called great stay, ZipRecruiter’s Pollak said.
Businesses are loath to lay off workers now after struggling to hire and retain workers just a few years ago.
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But job openings have declined, reducing the number of quits, which is a barometer of worker confidence in being able to find a new gig. This dynamic is largely due to another factor: the U.S. Federal Reserve’s campaign between early 2022 and mid-2023 to raise interest rates to tame high inflation, Pollak said.
It became more expensive to borrow, leading businesses to pull back on expansion and new ventures, and in turn, reduce hiring, she said. The Fed started cutting interest rates in September, but signaled after its latest rate cut on Wednesday that it would move slower to reduce rates than previously forecast.
Overall, dynamics suggest a “stabilizing labor market, though one still shaped by the lessons of recent shocks,” said Indeed’s Shrivastava.
The great stay means Americans with a job have “unprecedented job security,” Pollak said.
But those looking for a job — including new college graduates and workers dissatisfied with their current role — will likely have a tough time finding a gig, Pollak said. She recommends they widen their search and perhaps try to learn new skills.
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