Six months. Five-hundred-seventy-six applications. Twenty-nine responses. Four interviews. And still, no job. When my younger brother rattled off these numbers to me in the fall of 2023, I was dismissive. He had recently graduated with honors from one of the top private universities in the country into a historically strong labor market. I assured him that his struggle must be some kind of fluke. If he just kept at it, things would turn around.

Only they didn’t. More weeks and months went by, and the responses from employers became even sparser. I began to wonder whether my brother had written his resume in Comic Sans or was wearing a fedora to interviews. And then I started to hear similar stories from friends, neighbors, and former colleagues. I discovered entire Subreddits and TikTok hashtags and news articles full of job-market tales almost identical to my brother’s. “It feels like I am screaming into the void with each application I am filling out,” one recent graduate told the New York Times columnist Peter Coy last May.

As someone who writes about the economy for a living, I was baffled. The unemployment rate was hovering near a 50-year low, which is historically a very good thing for people seeking work. How could finding a job be so hard?

The answer is that two seemingly incompatible things are happening in the job market at the same time. Even as the unemployment rate has hovered around 4 percent for more than three years, the pace of hiring has slowed to levels last seen shortly after the Great Recession, when the unemployment rate was nearly twice as high. The percentage of workers voluntarily quitting their jobs to find new ones, a signal of worker power and confidence, has fallen by a third from its peak in 2021 and 2022 to nearly its lowest level in a decade. The labor market is seemingly locked in place: Employees are staying put, and employers aren’t searching for new ones. And the dynamic appears to be affecting white-collar professions the most. “I don’t want to say this kind of thing has never happened,” Guy Berger, the director of economic research at the Burning Glass Institute, told me. “But I’ve certainly never seen anything like it in my career as an economist.” Call it the Big Freeze.

[Jonathan Chait: The real goal of the Trump economy]

The most obvious victims of a frozen labor market are frustrated job seekers like my brother. But the indirect consequences of the Big Freeze could be even more serious. Lurking beneath the positive big-picture employment numbers is a troubling dynamic that threatens not only the job prospects of young college graduates but the long-term health of the U.S. economy itself.  

The period from the spring of 2021 through early 2023, when employees were switching jobs like never before, was a great time to be an American worker. (Remember all those stories about the Great Resignation?) It was also a stressful time to be an employer. Businesses struggled to fill open positions, and when they finally did, their newly trained employees might quit within weeks. “It’s hard to overstate the impact this period had on the psyche of American companies,” Matt Plummer, a senior vice president at ZipRecruiter who advises dozens of companies on their hiring strategies, told me. “No one wanted to go through anything like it again.” Scarred by the chaos of the Great Resignation, Plummer and others told me, many employers grew far less willing to either let go of their existing workers or try to hire new ones.

Even as they were still shaken by the recent past, employers were also growing warier about America’s economic future. In March 2022, the Federal Reserve began raising interest rates to tame inflation, and the business world adopted the nearly unanimous consensus that a recession was around the corner. Many companies therefore decided to pause plans to open new locations, build new factories, or launch new products—all of which meant less of a need to hire new employees.

Once it became clear that a recession had been avoided, a new source of uncertainty emerged: politics. Recognizing that the outcome of the 2024 presidential election could result in two radically different policy environments, many companies decided to keep hiring plans on hold until after November. “The most common thing I hear from employers is ‘We can’t move forward if we don’t know where the world is going to be in six months,’” Kyle M. K., a talent-strategy adviser at Indeed, told me. “Survive Until ’25” became an unofficial rallying cry for businesses across the country.

By the end of 2024, the pace of new hiring had fallen to where it had been in the early 2010s, when unemployment was more than 7 percent, as Berger observed in January. For most of last year, the overall hiring rate was closer to what it was at the bottom of the Great Recession than it was at the peak of the Great Resignation. But because the economy remained strong and consumers kept spending money, layoffs remained near historic lows, too, which explains why the unemployment rate hardly budged.

Look beyond the aggregate figures, and the hiring picture becomes even more disconcerting. As the Washington Post columnist Heather Long recently pointed out, more than half of the total job gains last year came from just two sectors: health care and state and local government, which surged as the pandemic-era exodus to the suburbs and the Sunbelt generated demand for teachers, firefighters, nurses, and the like. According to an analysis from Julia Pollak, the chief economist at ZipRecruiter, hiring in basically every other sector, including construction, retail, and leisure and hospitality, is down significantly relative to pre-pandemic levels. Among the hardest-hit professions have been the white-collar jobs that have been historically insulated from downturns. The “professional and business services” sector, which includes architects, accountants, lawyers, and consultants, among other professions, actually lost jobs over the past two years, something that last happened during the recession years of 2008, 2009, and 2020. The tech and finance sectors have fared only slightly better. (The rise of generative AI might be one reason the hiring slowdown has been even worse in these fields, but the data so far are equivocal.)

[David Frum: How Trump lost his trade war]

A job market with few hiring opportunities is especially punishing for young people entering the workforce or trying to advance up the career ladder, including those with a college degree. According to a recent analysis by ADP Research, the hiring rate for young college graduates has declined the most of any education level in recent years. Since 2022, this group has experienced a higher unemployment rate than the overall workforce for the first sustained period since at least 1990. That doesn’t change the fact that college graduates have significantly better employment prospects and higher earnings over their lifetime. It does, however, mean that young college graduates are struggling much more than the headline economic indicators would suggest.

For job seekers, a frozen labor market is still preferable to a recessionary one. My brother, for example, eventually found a job. But the Big Freeze is not a problem only for the currently unemployed. Switching from one job to another is the main way in which American workers increase their earnings, advance in their careers, and find jobs that make them happy. And indeed, over the past few years, wage growth has slowed, job satisfaction has declined, and workers’ confidence in finding a new job has plummeted. According to a recent poll from Glassdoor, two-thirds of workers report feeling “stuck” in their current roles. That fact, along with a similar dynamic in the housing market—the percentage of people who move in a given year has fallen to its lowest point since data were first collected in the 1940s—might help explain why so many Americans remain so unhappy about an economy that is strong along so many other dimensions.

This is a warning sign. The historical record shows that when people are hesitant to move or change jobs, productivity falls, innovation declines, living standards stagnate, inequality rises, and social mobility craters. “This is what worries me more than anything else about this moment,” Pollak told me. “A stagnant economy, where everyone is cautious and conservative, has all kinds of negative downstream effects.”

According to economists and executives, the labor market won’t thaw until employers feel confident enough about the future to begin hiring at a more normal pace. Six months ago, businesses hoped that such a moment would arrive in early 2025, with inflation defeated and the election decided. Instead, the early weeks of Donald Trump’s presidency have featured the looming threat of tariffs and trade wars, higher-than-expected inflation, rising bond yields, and a chaotic assault on federal programs. Corporate America is less sure about the future than ever, and the economy is still frozen in place.

The chance that the Federal Reserve will boost interest rates this year to limit inflation is higher than the near-zero level currently priced into the markets, said Jon Brager, a portfolio manager at Palmer Square Capital Management, a Kansas City-based firm that invests in floating rate corporate debt.

Read more...

U.S. stocks were little changed after minutes from the January meeting of the Federal Reserve’s interest-rate setting committee indicated that the central bank’s officials aren’t in a hurry to further cut borrowing costs.

Read more...

Woe to the American consumer. The price of groceries, gas, housing, and other goods and services jumped 0.5 percent from December to January; the cost of car insurance is up 12 percent year over year and the price of eggs is up 53 percent. “On day one, we will end inflation and make America affordable again,” President Donald Trump promised on the campaign trail. That is not happening. Worse, the White House’s early policies are making it more likely that the country’s cost-of-living crisis will endure for years to come.

Voters’ dissatisfaction with inflation delivered the White House to Trump; Americans cited the economy as their No. 1 issue, inflation as their No. 1 economic concern, and Trump as their preferred candidate to handle it. On his first day in office, Trump ordered the government to deliver “emergency price relief” by figuring out ways to expand the housing supply, streamline the health-care system, eliminate climate rules on home appliances, and expand energy production.

Each of those policies would bring down costs, if enacted, as would Trump’s deregulatory agenda. But as a general point, the White House has fewer ways to quickly temper consumer prices than it does to, say, bolster or lower demand—a problem that bedeviled the Biden administration too. The Federal Reserve controls borrowing rates. The housing and child-care shortages are the products of decades of underinvestment, the former also heavily influenced by municipal policies that Washington has no say in. The trillions of dollars spent by billions of consumers on billions of products generated by millions of firms—the gravitational forces of supply and demand, settled on liquid international markets and affected by government policies only on the margin—are what determine how much people pay at big-box stores and the gas station.

The policies the Trump White House has enacted are likely to make the cost crisis worse. Trump has described the word tariff as “the most beautiful” one to appear in the dictionary. He insists that adding levies to the goods produced by foreign companies will boost national industry and keep American households from getting ripped off. But economists from across the political spectrum agree that tariffs are taxes paid by domestic consumers. They increase prices.

Trump has backed away from the tariffs he proposed on Mexico and Canada in his first weeks in office. Yet he has implemented new levies on Chinese goods, spurring Beijing to retaliate with levies on American natural gas, oil, and farm machinery. This week, Trump also announced new steel and aluminum tariffs, raising costs for American automakers, energy companies, construction firms, and other businesses working in heavy industry. If Trump ends up implementing trade restrictions on Canada and Mexico as originally proposed, or ones of similar scale, the effective tariff rate on American imports would increase from 3 percent to 10 percent—the highest in seven decades.

Studies of the tariffs Trump implemented in his first term demonstrate what will happen. By the end of 2018, Trump’s trade policies were costing Americans an additional $3.2 billion a month at grocery stores and malls, while also reducing the variety of goods American consumers could purchase. And those tariffs were far more limited than the ones he has promised to impose this time.

On top of making imports more expensive, Trump is raising the cost of hiring workers and doing business in the United States by cracking down on the flow of migrants. Immigration and Customs Enforcement has amped up its raids; Trump is also attempting to end birthright citizenship and close the borders. Fewer undocumented workers will enter the country, and fewer will remain.

Undocumented workers, and immigrants in general, are crucial to millions of American businesses, particularly farms, construction firms, child-care providers, and delivery services. If you get rid of workers, production will go down and prices will spike. One new study found that the increase in deportations during the Obama administration led each average-size county in the country to forgo “the equivalent of an entire year’s worth of additional residential construction”—meaning 1,994 new homes—over three years. As a result, home prices jumped 10 percent.

At the same time, Trump is silencing the country’s contagion-monitoring system during a bird-flu outbreak, meaning farmers might end up culling millions more chickens and dairy cows. (Bird flu is the reason egg prices are up so much to begin with.) He is also rattling the markets, leading companies to pull back on the kind of investments that would increase domestic production—presenting “a compelling case for taking some chips off the table,” as Tiffany Wilding and Andrew Balls of Pimco put it in a note to investors.

All in all, Trump’s policies should add 0.5 percent to consumer costs this year, Mark Zandi of Moody’s Analytics told me, slowing GDP growth by 0.2 percent this year and 0.5 percent next year. He said he did not expect the country’s growth to be “derailed, given the economy’s strong underlying fundamentals and Trump’s willingness and ability to pivot on policy.” But it “will be meaningfully diminished.”

America is lucky that its underlying fundamentals are strong. The stock market is high; unemployment is low; wages are going up; businesses are generating big profits. Still, people are struggling with a dire housing shortage, bruising out-of-pocket medical costs, and a severe undersupply of early-childhood-education options—as well as expensive eggs and unaffordable car and home insurance. Trump has yet to put out a policy agenda that would tackle those problems in the long term, and is backing away from his campaign promise to make America affordable again in the near term too.

He seems to be betting that voters don’t care as much about the economy as they said they did. “They all said inflation was the No. 1 issue,” Trump said after his inauguration. “I said, I disagree. I think people coming into our country from prisons and from mental institutions is a bigger issue.” He added: “How many times can you say that an apple has doubled in cost?”