This kind of prolonged reversal has been rare. In fact, Atlanta Fed data shows it only tends to appear during major downturns:
The dot-com bust in the early 2000s
The Great Recession from 2009 to 2010, when the reversal lasted 18 months
“We only tend to see it around other times when the labor market has been weak,” explained Erica Groshen, senior economics advisor at Cornell University and former commissioner of the Bureau of Labor Statistics.
The shift parallels other financial pressures Americans are facing in 2025. As we’ve covered in our analysis of the rising cost of living, many households are already stretched thin by inflation, credit card debt, and housing costs.
Several factors are driving this unexpected reversal:
Fewer job openings: Hiring has slowed to its weakest pace in more than a decade. Employers are cautious as high interest rates and global uncertainty weigh on growth.
Lower quits rate: Just 2% of workers are voluntarily leaving their jobs in 2025—the lowest since 2016, outside the early pandemic.
Less bargaining power: With fewer opportunities, companies don’t feel pressure to offer higher pay to attract new hires.
“In this ‘frozen’ labor market, workers who leave jobs are more likely to accept positions that don’t pay as well,” said Allison Shrivastava, an economist at Indeed.
The shift is especially painful for the long-term unemployed. In July, 25% of jobless Americans had been out of work for six months or more. Many had already exhausted unemployment benefits, leaving them more likely to accept lower wages just to re-enter the workforce.
“They may be willing to take a job for a lower wage than they were at the beginning,” Groshen said.
This echoes broader struggles highlighted in our report on recent graduates navigating today’s job market. For both young workers and the long-term unemployed, bargaining power is shrinking.
Even in a softer labor market, experts recommend strategies to stay competitive:
Network creatively: Go beyond job boards. Conferences, lectures, and even unexpected community events can spark valuable connections.
Look internally: Promotions or transfers within your current company may be easier to land than external roles.
Invest in skills: Upskilling and reskilling can put you in a stronger position when hiring rebounds.
And if you’re looking at the long view, remember the power of compounding. As we explored in our feature on the real meaning of financial freedom, steady, intentional progress often pays off more than chasing quick wins.
Historically, switching jobs has been the fastest way to grow wages. But in today’s labor market, that advantage has disappeared. With fewer openings and weaker bargaining power, holding onto your current role may provide more financial stability—for now.
The smartest move? Focus on building skills, expanding your network, and preparing for the next upswing. Because when the market does thaw, those who invested in themselves today will be first in line to seize tomorrow’s opportunities.
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