The Big Freeze: Understanding the Paradox of the U.S. Labor Market
A Personal Struggle Reflects a Broader Crisis
In the fall of 2023, my younger brother, a recent honors graduate from one of the top private universities in the country, shared his job search statistics: 576 applications, 29 responses, and four interviews, yet no job. Despite graduating into a historically strong labor market, he found himself in a frustrating battle to secure employment. His story, though disheartening, is not unique. Friends, neighbors, and former colleagues echoed similar struggles, and online communities like Subreddits and TikTok were flooded with tales of job market woes. One recent graduate described the experience to The New York Times as "screaming into the void" with each application. As someone who writes about the economy, I couldn’t help but ask: How could the job market be so tough when the unemployment rate was near a 50-year low?
The Paradox of the Frozen Labor Market
The answer lies in a paradoxical reality: the U.S. labor market is simultaneously strong and stagnant. While the unemployment rate has hovered around 4% for over three years, hiring has slowed to levels last seen after the Great Recession. The rate of workers voluntarily quitting their jobs—a key indicator of worker confidence—has dropped by a third since its peak in 2021 and 2022, hitting nearly its lowest level in a decade. This phenomenon, dubbed the "Big Freeze," has left the labor market stuck: employees are staying in their current roles, and employers are hesitant to hire new ones. This dynamic is particularly pronounced in white-collar professions, which are typically insulated from economic downturns. As Guy Berger, director of economic research at the Burning Glass Institute, noted, "I’ve certainly never seen anything like it in my career as an economist."
The Aftermath of the Great Resignation
The roots of the Big Freeze can be traced back to the Great Resignation, the period from 2021 to early 2023 when employees switched jobs at unprecedented rates. While this was a boon for workers, it left employers scrambling to fill positions and retain talent. Companies were stretched thin, training new hires only to see them leave shortly after. Matt Plummer, a senior vice president at ZipRecruiter, described the era as having a profound impact on the psyche of American businesses. Scarred by the chaos, many employers became far less willing to let go of existing workers or hire new ones. This hesitancy was compounded by economic uncertainty, as the Federal Reserve began raising interest rates in March 2022 to combat inflation, leading many companies to pause expansion plans out of fear of an impending recession.
Political Uncertainty and the "Survive Until ’25" Mindset
Even when a recession was avoided, a new source of uncertainty emerged: the 2024 presidential election. Recognizing that the outcome could lead to drastically different policy environments, many companies hit the brakes on hiring until after November. Kyle M. K., a talent-strategy adviser at Indeed, summed up the sentiment: "We can’t move forward if we don’t know where the world is going to be in six months." This mindset, dubbed "Survive Until ’25," became a rallying cry for businesses nationwide. By the end of 2024, hiring had slowed to levels not seen since the early 2010s, when unemployment was over 7%. Yet, layoffs remained near historic lows, keeping the unemployment rate steady and masking the underlying stagnation.
The Hidden Toll of the Frozen Job Market
The Big Freeze is punishing for job seekers, particularly young college graduates. According to ADP Research, the hiring rate for this group has declined the most of any education level since 2022. For the first time since at least 1990, young college graduates have experienced a higher unemployment rate than the overall workforce. While they still fare better than their less-educated peers in the long term, the current struggle is real. Beyond the unemployed, the frozen labor market is also problematic for those looking to switch jobs. Job mobility is a key driver of wage growth, career advancement, and job satisfaction. Yet, wage growth has slowed, job satisfaction has declined, and worker confidence has plummeted. Two-thirds of workers report feeling "stuck" in their roles, according to a Glassdoor poll.
The Bigger Picture: A Stagnant Economy and Its Consequences
The Big Freeze is not just a problem for individual job seekers; it has broader implications for the economy. When people are hesitant to move or change jobs, productivity falls, innovation stalls, and living standards stagnate. Social mobility declines, and inequality widens. Julia Pollak, chief economist at ZipRecruiter, warns that this is the most concerning aspect of the current labor market: "A stagnant economy, where everyone is cautious and conservative, has all kinds of negative downstream effects." For now, the labor market remains frozen, with employers unwilling to hire until they feel confident about the future. But with the early weeks of Donald Trump’s presidency marked by rising inflation, trade tensions, and political chaos, that confidence seems farther away than ever. The Big Freeze shows no signs of thawing, leaving workers, employers, and the economy itself in limbo.
