Low layoffs and low hiring have created a fragile equilibrium. The underlying picture points to drift, not true growth.

Federal Reserve chair Jerome Powell recently emphasized that the US economy remains resilient, in large part due to a labor market holding steady, despite growing uncertainty. The direct words Powell used to describe the current situation were a kind of “zero employment growth equilibrium.” There is limited hiring, yes, but also limited layoffs. When combined with persistently low jobless claims, policymakers seem to be of the opinion that conditions remain stable, even strong, in toto. On paper, we rest very near full employment. Unfortunately, this is only part of the story. Upon digging, the labor market shows signs of strain. 

Hiring has markedly slowed, and recent data and surveys point to noticeably weaker hiring conditions compared with the last decade. Some reports show outright job losses along with rising unemployment, challenging the notion of continued strength. Yet layoffs remain subdued, and even jobless claims are staying low, signaling that firms are holding onto their workers. This “low-hire, low-fire” labor market appears stable, but it lacks forward momentum. What we appear to have is an economy that is neither collapsing nor improving — drifting, not growing. 

And so we reach this strange purported equilibrium. Labor markets are not collapsing, but they are not advancing with any force, either. This stability is stagnant. Powell did add that this stagnation “does have a feel of downside risk, and it’s not kind of a really comfortable balance,” but alarm bells are not ringing in DC yet. When looking at employment data, this strange picture emerges. Here, then, we see the limits of employment data, like the concept of full employment.

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