Americans’ once-in-a-generation job market has come to an end.
The red-hot hiring and rock-bottom unemployment that helped millions of workers find new gigs, boost their wages and reinvent their careers are giving way to more prosaic times. While the market is still healthy by many measures, signs of difficulty are creeping in.
The unemployment rate ticked up to 4.1% last month—the first time it has crossed above 4% since 2021. That’s still low by historical measures, but it’s up from 3.4% early last year. Workers have stopped quitting jobs at a frenzied pace, and college grads are having a hard time breaking into the market at all. The number of open positions for every unemployed person is back to the prepandemic level of 1.2, down from over 2 in 2022.
And while the risk of getting laid off is still low, hiring has fallen beneath its pre-Covid level.
Many economists see a job market that has come back into balance, though some worry that conditions could continue worsening.
“The labor market cooled back to a strong place. This is a good labor market. But it’s not clear if the cooling is done,” said Claudia Sahm, chief economist at New Century Advisors, an investment firm.
Periods since 1950 when unemployment was lower than 4% for at least six months
5.0
%
2018 to 2020
4.5
2021 to
2024
4.0
3.5
1966 to
1970
3.0
2.5
1951 to 1953
2.0
One
year
Two
years
Three
years
Four
years
Economists say the historically unusual dynamics that caused the boom—an economy that shut down and then roared back to life during a pandemic—were always going to be fleeting.
“Frankly, I’m not sure that labor market was ever sustainable. It was built on the back of a huge Covid shock. It was amazing to see but it was never going to stick around long,” said Nick Bunker, an economist at the job-search site Indeed.
The boom times were fun while they lasted. Wages soared as employers fought for workers during a nationwide labor shortage, peaking at year-over-year growth of 5.9% in March 2022, federal data show.
Unions seized the moment to negotiate big gains in pay and benefits, from UPS drivers and auto workers to healthcare and brewery workers.
Wage growth has since fallen back to earth, hitting 3.9% year-over-year last month, still higher than the 3% or so of the months before the pandemic.
The U.S. economy is still adding a solid number of jobs each month—206,000 in June—continuing an impressive 42 consecutive months of employment growth. Last month’s hiring was concentrated in a few sectors, however, including healthcare, construction and government work. Other occupations, such as restaurant work and certain white-collar jobs, have plateaued or dipped after feverish gains during the pandemic.
Dan Roth, a human-resources professional in San Diego, has been looking for work since getting laid off from Amazon in January 2023. Competition is so fierce that it’s hard to get an interview, said the 39-year-old father of twins.
Six months ago he had a great meeting at Kickstarter but ended up getting rejected. “I asked the person why and it was like, there were 3,000 applicants,” Roth said. “There was nothing I could have done.”
The grim search marks a comedown from the heyday of the labor shortage, when companies were snapping up HR professionals to oversee brisk hiring of other workers. Roth got hired full time at Amazon in 2022 with a salary and bonus totaling $170,000 a year, substantially more than he had ever earned.
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From his HR perch he saw how big tech firms were throwing money at software programmers and others who could easily play employers against each other. Some Amazon employees were leaving for higher pay elsewhere with the intention of returning, just to boost their compensation, Roth recalled. “There was so much hopping.”
In some professions, the tables have turned.
“As soon as a position is open on LinkedIn, within an hour over 100 people have applied,” said Carren Jones, an HR professional in the Philadelphia area who has been job hunting for more than a year. Her savings are dwindling and some of her networking has fallen through. “One HR professional who was trying to help me land my next opportunity, she wound up getting laid off,” Jones said.
Ed Samuel, a career coach in Kennett Square, Pa., said he has seen downward pressure on salaries for some executive positions, in fields including cybersecurity. “You see jobs posted on LinkedIn in the $175,000 to $225,000 range, with job descriptions that are almost identical to a position that would have been $275,000 a few years ago,” he said.
Last week’s beige book, a regular economic update from the Federal Reserve’s regional banks, reported that some employers are still struggling to find skilled workers for manufacturing, engineering, accounting and other jobs.
But most regions also described signs of labor-market cooling. The Minneapolis Fed said job fairs and job centers were experiencing increased traffic. Hotels in Boston are “finally adequately staffed” after labor shortages, according to the Boston Fed. And many businesses in the Kansas City Fed’s district have reduced staff hours and pulled back on job postings.
One bright spot for workers: The layoff rate remains low, with many businesses holding on to employees they struggled to find during the labor shortage. It’s the hiring rate that has come down, to a level a bit below pre-Covid times.
“It’s a good time to have a job. It’s a harder time to find one,” said Sahm, the economist.
Where companies are trimming, it is often because of over-hiring during the pandemic, said Andy Challenger, senior vice president at Challenger, Gray & Christmas, a firm that helps employers handle layoffs.
“It’s slow cooling,” he said. “I don’t think there is evidence that we’re going to hit a cliff and see layoffs accelerate.”
Write to Jeanne Whalen at Jeanne.Whalen@wsj.com
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Appeared in the July 25, 2024, print edition as 'Signs Grow That Hottest Job Market In Decades Is Cooling'.
