The labor market may be poised to enter 2024 in its quietest state in years.
After the unprecedented activity, persistent headlines, and viral social media trends its seen since the outbreak of the pandemic—which included an initial wave of layoffs in early 2020, followed by the Great Resignation, quiet quitting, quiet firing, and quiet hiring—the labor market is, for the first time in years, just plain “quiet.”
“While we can’t predict the future, our State of Hiring data indicates that, despite uncertain economic conditions in 2023, companies plan to add new permanent roles and fill for vacated roles during the first half of 2024,” says Dawn Fay, the American operational president for human resources consulting firm Robert Half.
That’s despite some prominent layoffs in recent weeks, including Spotify, Chewy, Hasbro, and Zulily. According to the Robert Half study, only 1% of employers intend to eliminate positions in the first half of 2023, while another 2% will leave their headcount as-is. Another 39%, however, plan to fill vacant positions and 57% plan to add new positions in the first half of the year.
“While there is still some uncertainty, the companies we’ve surveyed feel optimistic about the New Year,” says Fay.
North American economic research director at the Indeed Hiring Lab, Nick Bunker, agrees.
“It’s been kind of a dead sprint the last few years; now it’s settling down to a more sustainable marathon pace,” says Bunker. “Next year, fingers crossed, is hopefully a boring year in the labor market; one where hiring is still robust but with slower hiring growth, wage growth, and inflation.”
A Return to Pre-Pandemic Norms
Bunker explains that the unique conditions that drove the labor market to extremes in recent years have largely returned to pre-pandemic norms. For example, the Bureau of Labor Statistics shows a steady decline in resignation rates this year, most recently hitting 3.6 million in September, compared to a record breaking 4.5 million recorded in November of 2021.
“We’re seeing less people quitting their jobs, less churn; hiring is slowing down but it’s still robust,” he says. “If we see a continuation of what we’ve seen over the second half of this year, it’s going to be a less turbulent, less dramatic year in the labor market.”
Bunker adds that the economic picture seems pretty good for employees overall, as there is still strong demand for workers. While employers may still struggle to fill certain positions—especially those in high demand—they aren’t seeing the sky-high resignation rates of the recent past, either.
“As we’re heading into 2024 there’s a case for cautious optimism,” he says. “The Great Resignation, people quitting their jobs at elevated rates, that’s now behind us; the most recent data is showing people are leaving their jobs at essentially the same rate they were before the pandemic.”
Economic Uncertainty Is Creating a Labor Market Stalemate
The rapid economic swings of recent years have largely returned to a more even-keel, but there remains a lot of uncertainty about which direction the economy will move in the New Year, putting both employers and employees into something of a wait-and-see mode.
“Hiring has fallen, but [unemployment rates] have not ticked up, which suggests firms are trying to avoid shedding any workers they might need 12 or 24 months down the road,” explains Preston Caldwell, chief U.S. economist for Morningstar Research Services. (Disclosure: Fast Company is owned by Joe Mansueto, founder and executive chairman of Morningstar, Inc.)
Caldwell, for one, is projecting a slight drop of between half and 1% in annualized GDP growth next year. If that prediction comes to fruition, he suggests it would further slow activity in the labor market.
“That’s a significant slowdown; it’s not recessionary territory, but it’s below normal,” Caldwell says. “A low growth rate like that means business’s needs for workers will diminish a bit, which is why we expect net hiring to be pretty much zero, perhaps dipping into negative territory.”
While employers may need to hire fewer workers in 2024, however, layoffs are not widely anticipated either.
“The market sometimes pauses a little when there’s some uncertainty, and at this point it feels pretty uncertain,” says Fay. “I think that will play into the New Year, which could cause things to just move at a slower pace until people feel like they can read the tea leaves a little better.”
Answering the Flexibility Question
Labor market activity may also be slowing now that there is greater clarity around the question of flexibility. Fay suggests that a misalignment in preferences around remote and hybrid work added tension between employees and employers in recent years, and may have been at least partially responsible for elevated resignation rates in 2021 and 2022.
Nearly three years after the pandemic began most organizations have settled on a long-term flexibility strategy, giving employees one less reason to resign. Furthermore, Fay says many employers now use flexibility as an incentive for tenured staff, which may be further contributing to retention efforts.
“We see employees thinking, ‘as much as I’d like to make a change I’ve earned a lot of flexibility because I’ve been here a while, and if I’m the new employee who needs to be trained and onboarded I might not get that flexibility [if I switch employers],’” she says.
Furthermore, Fay suggests a more consistent flexibility policy may also be contributing to employee retention in more subtle ways. “When you’re not together with people and seeing each other you tend to lose that trust in those relationships, and we’re seeing them come together more and more.”
We’re Not Out of the Woods Yet
While most labor market watchers are optimistic that 2024 will bring about a slower, quieter, more consistent pace, there are a few factors that could send it back into chaos.
For example, while the economy is heading in the right direction, a dip into recessionary territory could have a significant impact on the labor market. Furthermore, election years tend to be a bit more volatile, and Fay warns the upcoming presidential election could add a little extra turmoil to the economy, and with it, the labor market. And then, of course, there are the unknown consequences of the rapid advancement of artificial intelligence.
“There’s a lot of talk about what that’s going to do, and lots of speculation around what kinds of jobs might go away or change as a result,” says Fay.
Barring any major changes to the economy, a major job displacement brought by AI innovation, or other unforeseen disruptions, 2024 is shaping up to be a pretty quiet year in the U.S. labor market, relatively speaking. Given the chaos of the post-pandemic era, that slower pace is widely welcomed.
