Job Seekers Face Growing Concerns in Cooling Labor Market
The confidence of job seekers is waning as the labor market continues to cool from its red-hot pace seen in 2021 and 2022. With rising unemployment and fewer businesses hiring, the optimism that characterized the labor market during the peak of the post-pandemic recovery is diminishing. Recent data from ZipRecruiter indicates that job seeker confidence has fallen to its lowest level over two years, highlighting increasing pessimism about the prospects of landing preferred jobs.
During the pandemic recovery, the labour market experienced unprecedented strength. The roll-out of COVID-19 vaccines and the broad reopening of the U.S. economy in 2021 led to a surge in worker demand. Job openings reached record highs, and businesses competed fiercely for talent by rapidly increasing wages. This period saw the unemployment rate drop to 3.4% in January 2023, the lowest since 1969. Workers enjoyed significant bargaining power, leading to what was termed the “Great Resignation,” with over 50 million people quitting their jobs in 2022 for better opportunities.
However, the labor market has gradually slowed down, even as it remains relatively resilient. The U.S. Federal Reserve’s aggressive interest-rate hikes to combat high inflation have played a significant role in this cooling. While the economy avoided the recession many economists predicted, the job market has seen a gradual increase in the unemployment rate, now at 4.1% as of June 2024.
ZipRecruiter’s quarterly survey highlights the decline in job seeker confidence, which has reached its lowest point since the survey began in Q1 2022. Julia Pollak, chief economist at ZipRecruiter, noted that the data provides a clear reason for the gloominess among job seekers. “The labour market is deteriorating and jobseekers are noticing,” she said.
The labor market’s readjustment has seen many job metrics return to pre-pandemic levels. Hiring rates by employers are at their lowest since 2017, indicating a significant shift from the hiring frenzy seen in the immediate post-pandemic period. Preston Caldwell, senior U.S. economist for Morningstar Research Services, observed that the “post-pandemic excesses of the U.S. job market have largely subsided.”
Despite the cooling labour market, the overall U.S. economy remains relatively strong. The aggressive interest-rate hikes by the Federal Reserve have successfully curbed inflation without pushing the economy into recession. However, the sentiment among Americans remains downbeat, a phenomenon some economists refer to as a “vibecession.” This disconnect between economic indicators and public sentiment persists despite the overall economic resilience.
Economists are wary of further cooling in the labour market. Nick Bunker, economic research director for North America at the Indeed Hiring Lab, pointed out that while the current unemployment rate is consistent with a strong labour market, its steady rise is concerning. “Today’s report shows the temperature of the labour market is still pleasant, but if current trends continue the weather could get uncomfortably cold,” he wrote.
Worker sentiment could see a rebound if the Federal Reserve begins to cut interest rates, which would lower borrowing costs for households and potentially stimulate hiring. Julia Pollak of ZipRecruiter remains hopeful, noting that “People seize on good news and get very excited.” However, the future remains uncertain, and any further cooling of the labour market could pose significant risks.
As the labor market continues to cool, job seekers are facing growing concerns about their prospects. The once red-hot market has slowed, with increasing unemployment and fewer job openings. While the overall economy remains strong, the sentiment among workers has soured. Economists caution that further cooling could be problematic, and the potential for a rebound depends on future economic policies and conditions. For now, the labor market remains in a state of flux, with job seekers navigating an increasingly challenging landscape.
