The Not-so-Fluid, Low-Hire, Low-Fire Economy

In June, the US unemployment rate stood at 4.2%, which is relatively low compared to historical levels. However, many workers, particularly young graduates, perceive the job market as challenging to navigate. In "The Job Market for Recent College Graduates," the author examined data indicating that recent graduates have a higher unemployment rate than other education groups.

Additionally, job growth for individuals aged 22-27 is experiencing an unusual decline. A recent commentary titled "The 'Low-hire, Low-fire' Labor Market" by Bruce Fallick of the Cleveland Fed discusses these trends. The graph shows a decrease in both hiring and quitting rates over time, suggesting a less fluid labor market. This pattern has been observed since at least the 1980s, but its underlying causes remain unclear.

Some experts suggest that the aging population may be a contributing factor, as older workers are less likely to voluntarily leave their jobs. Another study by Ingrid Chen, Marianna Kudlyak, and Riva Mikhlin of the San Francisco Fed, titled "Job-Finding Anomalies of the Current Expansion," examined the transition rates between employment categories.

They found that while the job-finding rate for the unemployed remains relatively high at 25-30%, it has dropped from 30% to 25% in 2023. The movement from out-of-the-labor force into employment has also declined significantly for younger adults, suggesting that it has become increasingly difficult for them to find a job.