Why was Jack let go, and Jane asked to take on more responsibility? This week, we’re zooming back out from our Modern Workplace Tale to look at the labor market more broadly and provide practical thoughts on what the current state of affairs means for employers.
One of our favorite economic indicators right now is “labor churn”. As a refresher, labor churn captures the portion of hiring and separations driven by workers switching jobs, not by jobs being created or destroyed. We think it’s useful because it better captures how fluid the labor market is relative to other headline numbers you typically see.
We’ve touched on this metric before (see When workers stay put), but since we last wrote on the topic, labor churn has continued to slow. Hire rates remain low. Quit rates remain low. Layoffs, while visible in specific industries and moments, remain historically low overall. The result is a labor market with not a lot of movement.
At the same time, unemployment has ticked up slightly. Importantly, this hasn’t been driven by widespread job losses. Instead, it reflects a labor market with “limited absorption capacity”. Put differently, the labor market today looks less like a dry ShamWow and more like one that’s already soaked through. There isn’t much slack left in the system. New labor force entrants (i.e., recent graduates, folks reentering the workforce) are having a harder time landing new opportunities because there simply aren’t many openings created by normal turnover.
Here’s an updated look at labor churn alongside the unemployment rate:
So where do we go from here? In our opinion, whether the economy accelerates, softens, or largely stays the same, we don’t think there is any path to hiring getting easier.
If things pick up, companies will continue to compete for a constrained pool of workers. If demand softens, the labor market will loosen, but that’s more of a statistical fact than of practical importance as companies don’t typically do much hiring in a recessionary environment…
What’s notably absent is a scenario where the labor market stays intact and hiring meaningfully loosens. Demographic trends make that unlikely. Organic population growth has slowed, and net immigration has fallen from recent peaks. The supply side of the labor market isn’t expanding fast enough to change the math.
Which brings us back to Jack and Jane.
In a low-churn environment, resilience comes less from how easily you can hire and more from how flexibly you can operate with the talent you already have. That flexibility matters not only because demand may change, but because technology, tools, and workflows continue to evolve in ways that are difficult to predict.
Jamie Dimon recently offered this advice for folks worried about their job in the age of AI:
“My advice to people would be critical thinking, learn skills, learn your EQ, learn how to be good in a meeting, how to communicate, how to write. You’ll have plenty of jobs.”
While this risks sounding like the kind of advice that gets categorized as “executive yells at cloud”, we think Mr. Dimon is offering a helpful perspective on adaptability. The skills he articulated travel across roles and functions. The skills that allow organizations to reallocate work internally, rather than immediately turning to a tight external market.
And this flexibility helps in both directions.
If demand accelerates, a more versatile workforce reduces the need to hire from a constrained labor pool to take advantage of growth opportunities.
If demand softens, it allows companies to adjust without facing an all-or-nothing headcount problem where “only this person does that” turns every decision into an integer choice rather than a fractional one.
For employers, here is our tactical advice:
- Hire for judgment and learning capacity, not just task execution
- Build at least one adjacent capability into core roles
- Manage toward outcomes and goals, not static job descriptions
This works if demand picks up. It works if demand softens. And it works if nothing really happens at all.
Until next time,
Your Spherion South Central WI & Northern IL team