Last year, after being laid off by the music streaming service Spotify, Joovay Arias thought he would quickly find another job as a software engineer. In 2019, he had no trouble finding a job.
Arias, 39, said, “Back then, lots of recruiters were contacting me – I had to turn them down.” Recently, Arias did find another job, but it was an unexpectedly challenging experience.
“I thought it would take about three months (to find a job),” he said, “but it ended up taking one year and three months.”
As confirmed by Arias and other job seekers, the red-hot U.S. labor market of the past few years has cooled off. The job market now finds itself in an unusual situation: job security for employees is generally high with historically low layoff rates. However, the pace of hiring has slowed down, making finding a new job more difficult.
A report released by the U.S. Department of Labor on September 6 showed that 142,000 nonfarm jobs were added in August, below the Dow Jones prediction of 161,000. This indicates a continued slowdown in the labor market. The unemployment rate dipped slightly to 4.2%, in line with expectations.
Nick Bunker, director of North American economic research at Indeed Hiring Lab, said, “If you have a job and you’re happy with it and want to keep it, the current situation is quite good. But if you’re unemployed or looking to switch jobs, it’s not as optimistic as it was a few years ago.”
According to the government’s latest monthly job vacancy and recruitment report, the number of listed job vacancies has dropped by over a third since the economy accelerated out of the pandemic recession in March 2022. In 26 of the past 28 months, companies have reduced temporary positions. This is a clear sign as economists often view temporary jobs as a harbinger of the job market’s direction, as many employers hire temporary workers before making full-time hires.
The New York Fed found that human resources agencies reported a slowdown in job growth because companies are more hesitant in making hiring decisions, resulting in longer job vacancies on the market.
The Minneapolis Fed stated that a human resources agency report indicated that “companies are becoming more selective in hiring.” The Atlanta Fed found that “only a few” companies plan to increase hiring efforts.
The trend of job-hopping from two years ago has slowed down as workers have gradually lost confidence in finding better pay or working conditions elsewhere. In July, only 3.3 million Americans quit their jobs, compared to a peak of 4.5 million in April 2022.
Aaron Terrazas, Chief Economist at job site Glassdoor, stated, “People are staying put due to concerns about not finding a new job.”
Economists say that the current slowdown in hiring is not only inevitable but healthy in the long run as it eases pressure on wage growth and inflation. Otherwise, the economy could overheat, prompting the Federal Reserve to significantly tighten credit, leading to an economic downturn.
The employment boom post-pandemic contrasts sharply with the slow recovery following the Great Recession of 2007-2009. At that time, it took over six years for the economy to recover the lost jobs. In contrast, the staggering number of pandemic job losses in 2020 (22 million) was reversed in less than two and a half years.
However, the booming economy has led to inflation, prompting the Fed to raise interest rates 11 times in 2022 and 2023 in an attempt to cool down the labor market and curb inflation. For a while, the economy and job market seemed unaffected by rising borrowing costs. Consumers continued to spend, businesses continued to expand, and the economy kept growing.
But eventually, the sustained high rates began to take effect. Last year, several well-known companies, including Spotify, announced layoffs in the face of high rates. However, apart from the tech sector and smaller financial sectors, most U.S. companies have not downsized. The number of initial claims for unemployment benefits was only slightly higher than pre-pandemic levels.
However, companies not laying off workers do not necessarily mean they are hiring more employees.
“Compared to one or two years ago, the current job market is much more challenging, especially for new entrants in the workforce,” Terrazas from Glassdoor indicated. “With tech, finance, and professional services sectors gradually cutting jobs over the past year and a half, there has been an influx of high-skilled, experienced talent into the job market.”
“From all indications, they are all looking for work. This also impacts more newcomers in the workforce… recent graduates, those with little work experience suddenly feel the pressure of competing with individuals with two, five, or ten years of experience. When these big fish enter the market, the small fish naturally get squeezed out.”
Despite facing pressure from the highest interest rates in decades, the economic conditions remain robust, growing at a healthy rate of 3% annually from April to June. Most Americans enjoy stable job security.
However, with job transitions becoming increasingly challenging, even some employed individuals are feeling the chill.
“The reality is that many people, even if they have a job, are feeling very anxious about the economy,” Terrazas said. “People feel like jobs are somewhat precarious, and workplace pressure is much higher than before.”
In a survey in August, the New York Federal Reserve found that Americans are now more worried about unemployment than at any time since 2014, when they were just beginning to feel the full effects of the recovery from the 2008-2009 Great Recession.
Adding to the anxiety is the recent memory of the employment boom, which still feels fresh. “For most people, their reference point is still 2021 and 2022 when the job market was very strong, and for us economists, it looks like normalization from unsustainable levels, but for many it feels like a loss of status,” Terrazas said.
Take Abby Neff for example. Since graduating from Ohio University in May 2023, she has been struggling to find a “traditional writing job” in the news industry.
Neff, 23, joined the AmeriCorps program at the government of Southeast Ohio, mobilizing Americans for community service. The job doesn’t pay much but gives her writing opportunities and insights into various fields from forestry to sustainable agriculture and riverbeds.
She never expected the job search to be this challenging.
“I feel like I did everything ‘right’ in college,” Neff regretted.
She edited a campus magazine and built connections in the industry. She attended some interviews only to later find out that the jobs had been filled, with no response from the employers.
“I felt ‘ghosted’,” she said. “I almost feel like I have to chase down the employer to get a response on my application or submission.”
Software engineer Arias began his job search the moment he was laid off in June 2023. Initially taking it casually, he spent time taking care of his newborn daughter and living off of severance from Spotify. But as the job search became tougher, he decided to ramp up his efforts earlier this year.
Arias started driving for a ride-hailing service and gathered job leads from passengers. He reached out to a company where he had attended a computer coding boot camp. Eventually, his networking paid off and he landed a new job.
However, the process was much more frustrating than he had anticipated. The employers he contacted would disappear without explanation.
“It’s the absolute worst experience,” Arias said. “You get that job posting, you send in your resume, and then communication ends there or you get an automated response. So you have no idea what happened, what you did wrong… It’s very frustrating and stressful because you don’t know what’s going on.”