Why the “Great Resignation” Became the “Great Stay”: Labor Economists

The U.S. labor market has undergone a dramatic transformation in recent years, from a market characterized by record levels of employee turnover to one in which there is little turnover.

In short, the “big layoff” of 2021 and 2022 has turned into what some labor economists call the “big stay,” a labor market with few hiring, terminations and layoffs.

“Pandemic-era labor market turbulence is increasingly in the rearview mirror,” said Julia Pollak, chief economist at ZipRecruiter.

Employers were scrambling for workers as the US economy reopened from the Covid-induced lull. Vacancies risen to historical levels, unemployment fell to its lowest point since the late 1960s wages grew at the fastest pace in decades as companies competed for talent.

More than 50 million workers left their jobs in 2022, breaking a record set the year before, attracted by better and wider job opportunities elsewhere.

However, the labor market has gradually cooled down.

The stops rate is “lower than what it was before the start of the pandemic, after reaching a fever pitch in 2022,” said Allison Shrivastava, an economist at Indeed.

Recruiting has fallen to the lowest level since 2013, excluding the early days of the pandemic. Yet, dismissed still historically low.

This dynamic — more people staying in their jobs amid low layoffs and unemployment — “points to employers retaining their workforce and more workers staying in their current jobs,” Shrivastava said.

Employer “scars” are one of the leading causes of the so-called great stay, says Pollak of ZipRecruiter.

Companies are reluctant to lay off employees after struggling to hire and retain employees a few years ago.

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But vacancies have fallen, driving down layoffs, which is a barometer of workers’ confidence in finding a new job. This dynamic is largely due to another factor: the US Federal Reserve’s campaign between early 2022 and mid-2023 to raise interest rates to curb high inflation, Pollak said.

It became more expensive to borrow, forcing companies to scale back expansion and new ventures and in turn cut hiring, she said. The Fed began cutting rates in September, but signaled after its latest rate cut on Wednesday that it would move more slowly on rate cuts than previously forecast.

Overall, the dynamics indicate a “stabilizing labor market, although still shaped by the lessons of recent shocks,” Indeed’s Shrivastava said.

The great stay means employed Americans have “unprecedented job security,” Pollak said.

But those looking for a job — including recent college graduates and workers dissatisfied with their current jobs — will likely struggle to find a job, Pollak said. She advises them to broaden their search and perhaps learn new skills.