Neither Firing nor Hiring: The US Labour Market Enters an Era of Low Mobility

The US labour market has recently shown a seemingly contradictory pattern. Employers have not embarked on a large-scale wave of layoffs, yet hiring and expansion have not clearly recovered. Unemployment remains low, while movement within the labour market is slowing.

August JOLTS data showed a layoffs rate of 1.0%, a hiring rate of 3.3% and a quits rate of 1.9%. Drawn from the same Job Openings and Labor Turnover Survey, these three measures describe the current picture: employment has not lost its footing, but labour-market mobility has cooled.

Why Aren’t Employers Laying People Off?

In past slowdowns, employers often cut staff first to reduce costs. This time has been different. Faced with business pressures, US companies have not rapidly reduced their existing workforces; they have adjusted by freezing expansion instead. Both the 1.0% layoffs rate and the 197,000 initial unemployment claims in the week ending September 19 support this reading. Employers are not free of pressure. They are managing this round of economic pressure without resorting to layoffs.

Demand for Workers Remains, but Mobility Is Cooling

Job openings stood at 7.079 million in August, down 256,000 from the previous month. The openings rate was 4.3%, while the hiring rate was 3.3%. Since March 2024, the hiring rate has stayed within a range of 3.1%–3.5%. Demand for workers still exists, but employers have not noticeably picked up the pace of filling positions.

Meanwhile, the quits rate has fluctuated only between 1.9% and 2.0% over the past 14 months. A few years ago, companies competed aggressively to recruit workers. Their focus has now shifted towards retaining existing employees. This is the defining feature of a labour market with low mobility.

Why Can Unemployment Still Stay Low?

The unemployment rate is a ratio. Over the past three months, the number of unemployed people in the US has ranged between 6.9 million and 7.1 million, while labour-force participation was 61.6% in August. A 4.1% unemployment rate—compared with the Fed’s estimate of a normal long-run level of 4.2%—therefore does not mean employment has returned to rapid expansion. It reflects the absence of a marked change in either the number of unemployed people or the size of the labour force.

With Mobility Cooling, the Fed Still Needs Inflation to Fall

Workers are moving between jobs less frequently, and employers’ competition for staff has eased, reducing the pressure for continued rapid wage growth. But inflation has not returned to target: July headline PCE inflation was 3.7%, and core PCE inflation was 3.3%.

The Fed’s current position is that employment remains broadly stable, while further progress on inflation still needs to be observed. For businesses, this is a period of waiting. For the Fed, it calls for continued caution and observation.

Three Indicators to Watch Next

Can the hiring rate return to above 3.5%?

Can the quits rate stay above 2%?

Can the layoffs rate hold at 1.0%?

The next major risk to US employment may not be a sudden wave of large-scale layoffs. It may be a prolonged period of weak hiring. What matters is not just how many existing jobs are lost, but whether new employment opportunities can begin to open up again.