The flipside of the current US labor market’s anomaly of low turnover is an exodus from the low-wage, essential workforce. Hiring activity is now at the lowest levels in a decade. Workers have shown a stunning lack of confidence to quit jobs, leading companies to hang onto their current workers. It projects the unemployment rate to rise as high as 4.5% over the next year. This increase signals both a cooling of demand for workers and a reduction of available supply in the labor market.
In June 2023, U.S.-based employers planned 47,999 job cuts. This figure marks a major drop of 49% from May’s count of 94,000 and a 2% fall from June of last year. Indeed, while layoffs dropped from 1.79 million in April to 1.6 million in May, this is still well below pre-pandemic levels. The big picture is one of rapidly slowing job growth. It’s no wonder that economists are forecasting just 115,000 new jobs in June.
A Cautious Workforce
It’s not just that many workers are afraid to leave their current jobs. This reluctance is a microcosm of the larger macro uncertainty plaguing today’s labor market. This wariness doesn’t implicitly make the economy weak. Rather, it shows employers’ lack of confidence in future hiring plans.
“There’s a difference between true economic weakness — which is no one’s buying my stuff, and I’m going to go out of business — and a lack of hiring because of uncertainty,” – Hetrick
This feeling captures the pain being felt by workers as well as companies. Companies are working under pressure from all sides—from punishingly high interest rates to federal funding cuts. So many are holding back from hiring new personnel, or directors are saying we need to lay people off.
According to Glassdoor chief economist Daniel Zhao, these dynamics are the product of underlying trends that have warped the shape of the labor market.
“A bevy of other headwinds are accumulating including federal layoffs and funding cuts, slowing immigration and revocation of TPS work authorization,” – Daniel Zhao, economist for Glassdoor
All of these create a climate where workers continue to be chained to their jobs, making hiring even more difficult.
Layoff Trends and Job Growth
Despite layoffs trending down over the last several months, companies continue to announce layoffs at a pace more typical of the pandemic and Great Recession. This dramatic increase is very troubling and suggests deeper deficits in today’s labor market. Businesses are still attempting to get their feet back under them, as uncertainty continues to reign. This push—not a robust economic underbelly—appears to be inspiring the drop in planned layoffs.
Job cuts in June were down considerably from May. In general, the picture still appears grim for future workers. As of this past June, the unemployment rate has already jumped up to 4.3%. Most economists are forecasting it will go up at least another 0.1 percentage point in the near future.
“Unemployment is still low, but we’ve got to watch how we get to that unemployment number,” – Hetrick
The underwhelming job growth overall undercuts many Americans’ chances of finding stable employment. Consequently, they are often put in predatory, bad jobs with limited other options.
The Impact of Tariffs and Economic Uncertainty
In the context of today’s tight labor market, economists have cited a number of outside causes affecting this labor market whiplash. These are just some of the mounting impacts that these tariffs placed on imports are starting to reap on hiring across industries.
Zhao is clear that these tariffs are only one part of a broader challenge that the job market continues to face.
“The early impacts of tariffs are just one drag on the job market,” – Daniel Zhao
According to Elizabeth Renter, a senior economist at NerdWallet, it’s going to be a long road for employment figures to show the complete effects of the tariffs and tightening of immigration policy. Those effects won’t be felt overnight.
“It will be months or even years before we see the full effects of tariffs, federal cuts and immigration policies in the labor market,” – Elizabeth Renter
At its core, this sentiment highlights the complicated nature of today’s labor landscape, deeply affected by several interrelated factors.