In A Frozen Job Market, More People Are Locked In (Or Locked Out)

Call it the “locked-in” job market: more people than usual are stuck in a job search or a job they don’t want, and employers are similarly holding on to workers they may or may not need.

That’s the picture painted by recent data on the labor market, which shows that employers and employees alike have responded to uncertainty about tariffs by staying in place. The hiring rate has slacked off in recent months, far below post-pandemic levels. Fewer workers are quitting their jobs too, a sign that they’re not confident in finding a better one. And layoffs remain near historic lows, showing employers are reluctant to let go of the workers they have.

“Americans are sticking with their current hand rather than drawing new cards,” Mischa Fisher, economist at online course site Udemy, wrote in a commentary last week about the most recent report on the job market from the Bureau of Labor Statistics. “We’re seeing the labor market’s version of the housing market’s ‘lock-in’ effect,’ where employees are too nervous to make moves. This freeze is blocking normal opportunity flow—early career workers can’t break in, experienced workers can’t move up, and burned-out employees stay put.”

In May, employers added 139,000 jobs, enough to prevent the unemployment rate from rising, but far from a hot labor market.

“While the U.S. job market continued to add a decent number of jobs in May, it’s notably cooler than it was even a few months ago, and continues to soften—to the point where there’s not much room for further slowdown before unemployment meaningfully starts to rise,” Cory Stahle, an economist at the hiring lab of job hunting site Indeed, wrote in a commentary.

Tariff Trouble

Behind the slowdown are President Donald Trump’s tariffs imposed on U.S. trading partners earlier in the year. Trump has announced tariffs, then paused or changed them so many times that companies have been left guessing about what import taxes will be years or months ahead. That means many have put expansion plans on ice while they await clarity, according to recent surveys of business leaders.

Many forecasters expect tariffs to start dragging down job growth and pushing up unemployment later in the year. The effects could be less if Trump strikes deals with trading partners.

In the meantime, other forces are also dragging down the job market. High interest rates from the Federal Reserve, meant to curb inflation, are keeping business loans expensive, and the Trump administration’s mass layoffs of federal workers have also taken a bite, Daniel Zhao, chief economist at job-hunting site Glassdoor, noted in a commentary last week.

“The job market continues to stand tall as headwinds from President Trump’s tariffs start to blow,” Zhao wrote. “Tariff impacts will likely show up later in the year, but in the interim, the job market is waiting for the other shoe to drop.”