Why the 'Great Resignation' Became the 'Great Residency': Labor Economists

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

In short, the “Great Resignation” of 2021 and 2022 has turned into what some labor economists call the “Great Survival,” a labor market characterized by declining levels of hiring, resignations, and layoffs.

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

Employers have demanded hiring as the US economy reopens after a Covid-fueled lull. Job opportunities have risen to historic levels, unemployment has fallen to its lowest levels since the late 1960s, and wages have grown at their fastest pace in decades as companies compete for talent.

More than 50 million workers will leave their jobs in 2022, breaking a record set just the previous year, attracted by better and plentiful job opportunities elsewhere.

However, the labor market has gradually slowed down.

Alison Shrivastava, an economist at the job site Indeed, said the quitting rate “is lower than it was before the start of the pandemic, after reaching a feverish peak in 2022.”

Hiring has slowed to its lowest rate since 2013, except in the early days of the pandemic. However, layoffs are still low by historical standards.

This dynamic — more people staying in their jobs amid lower layoffs and unemployment rates — “suggests employers are retaining their workforce as more employees remain in their current jobs,” Shrivastava said.

ZipRecruiter's Pollack said employer “scarring” is the primary driver of so-called great accommodations.

Companies now hate laying off workers after struggling to recruit and retain workers just a few years ago.

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But job opportunities have declined, leading to fewer job quits, a measure of workers' confidence in the ability to find a new job. Pollack said 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 tame high inflation.

Borrowing has become more expensive, causing companies to hold back on expansion and new projects, thus reducing hiring, she said. The Fed began cutting interest rates in September, but indicated after its latest rate cut on Wednesday that it would move more slowly to lower interest rates than previously expected.

Overall, the dynamics point to “a stabilizing labor market, although still shaped by lessons learned from recent shocks,” Indeed’s Shrivastava said.

The fantastic residency means Americans who have a job enjoy “unprecedented job security,” Pollack said.

But those looking for a job, including recent college graduates and workers who are dissatisfied with their current jobs, are likely to have trouble finding work, Pollack says. She recommends they expand their research and perhaps try learning new skills.