Job-to-job mobility in the US and UK labour markets is near multi-year lows, with hiring, quits and job switching subdued despite low layoffs. Economists and central bankers say the slowdown could weaken productivity and restrain wage growth over the long term.
A decade of low churn
In the United States, hiring, layoffs and quits rates have been stuck near a low point for roughly ten years, excluding the pandemic period. In the United Kingdom, the quarterly share of workers switching jobs barely exceeds the low recorded after the 2008 financial crisis.
Economists suggest the decline may reflect tariffs, uncertainty tied to artificial intelligence, the broader economic outlook and tighter immigration policies, though they describe it as part of a longer trend dating back to the 1980s, driven by an ageing population and rising education levels. The OECD also points to firms’ growing use of non-compete clauses and to rising minimum wages as possible dampeners on job switching.
Officials sound a warning
Speaking at a London conference last week, Fed governor Christopher Waller compared the apparent stability of the US labour market to a hospital patient’s condition. He said high churn had previously underpinned US outperformance against European peers, and warned the current situation threatens real wage growth.
Clare Lombardelli, Deputy Governor for monetary policy at the Bank of England, said a UK labour market stuck in a low gear directs people less effectively toward new opportunities, weakening productivity and hindering adaptation to artificial intelligence.
Stéphane Carcillo, head of the OECD’s Employment and Income Division, said productivity growth requires restructuring existing firms and the growth of startups, which depends entirely on the ability to reallocate labour efficiently. OECD and European Central Bank analyses link low labour market dynamism to Europe’s lag behind the United States in high-tech sectors.
