Economists predict a slowdown in U.S. labor market activity this year with the continued battle of inflation and a looming recession. The current unemployment rate fell slightly lower to 3.4% in January, per the Bureau of Labor Statistics—and despite recession fears, the unemployment rate has remained historically low between 3.5 to 3.7% since March 2022.
"Lower levels of job openings and hires also means lower turnover as people leave one role for another," said Mallory Vachon, senior economist at LaborIQ. "While fewer people voluntarily resigning is good news for hiring managers, it also means recruiters are having a harder time pulling people away from their current jobs."
Several jobs are available, but there are not enough workers to fill them. Data from the U.S. Chamber of Commerce shows over 10 million job openings and 5.7 million unemployed workers—meaning 4 million jobs would still be open if all unemployed people in the country found a job. "Demographic shifts and aging populations mean countries like the U.S. will experience an ongoing shortage of workers and hiring will remain challenging for years," said Svenja Gudell, chief economist at Indeed.
Layoff rates are historically low, which challenges the possibility of a recession. But companies may be more hesitant to lay off workers, even as economic pressure mounts, because it has been difficult to hire employees. As inflation persists, declined labor productivity has impacted economies worldwide. "Things would improve by the latter half of the year, and businesses need to think about retaining talent and positioning their teams to weather a downturn," said Vachon. "Instead of being reactive, stay aware of labor market trends and have your hiring plans ready once things turn around."