Unemployment is low, but workers aren’t quitting and businesses aren’t hiring. What’s going on?
...The answer is that two seemingly incompatible things are happening in the job market at the same time. Even as the unemployment rate has hovered around 4 percent for more than three years, the pace of hiring has slowed to levels last seen shortly after the Great Recession, when the unemployment rate was nearly twice as high. The percentage of workers voluntarily quitting their jobs to find new ones, a signal of worker power and confidence, has fallen by a third from its peak in 2021 and 2022 to nearly its lowest level in a decade. The labor market is seemingly locked in place: Employees are staying put, and employers aren’t searching for new ones. And the dynamic appears to be affecting white-collar professions the most. “I don’t want to say this kind of thing has never happened,” Guy Berger, the director of economic research at the Burning Glass Institute, told me. “But I’ve certainly never seen anything like it in my career as an economist.” Call it the Big Freeze. ...
... Once it became clear that a recession had been avoided, a new source of uncertainty emerged: politics. Recognizing that the outcome of the 2024 presidential election could result in two radically different policy environments, many companies decided to keep hiring plans on hold until after November. “The most common thing I hear from employers is ‘We can’t move forward if we don’t know where the world is going to be in six months,’” Kyle M. K., a talent-strategy adviser at Indeed, told me. “Survive Until ’25” became an unofficial rallying cry for businesses across the country.
By the end of 2024, the pace of new hiring had fallen to where it had been in the early 2010s, when unemployment was more than 7 percent, as Berger observed in January. For most of last year, the overall hiring rate was closer to what it was at the bottom of the Great Recession than it was at the peak of the Great Resignation. But because the economy remained strong and consumers kept spending money, layoffs remained near historic lows, too, which explains why the unemployment rate hardly budged. ...According to economists and executives, the labor market won’t thaw until employers feel confident enough about the future to begin hiring at a more normal pace. Six months ago, businesses hoped that such a moment would arrive in early 2025, with inflation defeated and the election decided. Instead, the early weeks of Donald Trump’s presidency have featured the looming threat of tariffs and trade wars, higher-than-expected inflation, rising bond yields, and a chaotic assault on federal programs. Corporate America is less sure about the future than ever, and the economy is still frozen in place.