The United States labor market is witnessing the “Great Freeze” due to mass layoffs, AI eliminating job opportunities, and a clampdown on immigration. Great freeze refers to a situation in which firms aren’t hiring as much as they are firing workers. This implies job seekers have few options and employees’ career advancement is stagnating.
Mass layoffs and AI advancements contribute to the ‘Great Freeze’ in the US labor market, limiting job opportunities and career advancement.. Photographer: Shelby Knowles/Bloomberg(Bloomberg)
There have been highs and lows in the US labor market lately. While there are several “lows” in the soft job market, including layoffs and unemployment for almost a year, job vacancies and hiring have seen a fall.
Even if no one is being laid off, there are currently few chances for career advancement or for job searchers to discover new roles.
US firms embrace job hugging as labor market remains stagnant
Despite the robust US economy, economists say that businesses are avoiding large layoffs and are hiring cautiously because of threats like tariffs, which is keeping the labor market stagnant.
“We’re seeing employers and job seekers both trying to wait out any of the uncertainty,” Nicole Bachaud, a labor economist at ZipRecruiter, told Business Insider.
ZipRecruiter’s poll shows that employee turnover has dropped significantly, from 177% in 2023 to barely 50% in 2025. In recent years, firms and employees have favored stability over change.
Many companies are holding onto their current employees due to economic volatility; this strategy is frequently referred to as “job hugging.” Compared to 24% in 2024, 30% of employers in 2025 stated that lower turnover was triggered by external economic factors.
Additionally, 76% of companies said they would like to maintain employees as a top priority in the upcoming year. Vacancies for entry-level employees are also expected to increase, as 32% of businesses intend to hire more people for these positions than for any other level.
Will current labour market conditions in US change soon?
The current state of the labor market is unlikely to improve very soon, according to experts. “We’re only a few months from the end of the year, and there isn’t an immediately obvious reason why the job market would suddenly snap out of the malaise it’s in,” said Daniel Zhao, chief economist at Glassdoor.
Firms are hesitant to take significant actions due to stable growth and consumer spending. According to UBS Global Wealth Management’s Jason Draho, firms are still successful and earnings are improving. Stephen Juneau, senior economist at Bank of America, told Business Insider that “Earnings are still positive, businesses are still making money, and there’s not really a catalyst for them to reevaluate their head count.”
However, there are now signals of change. In the upcoming year, over two-thirds of companies (63%) intend to hire more people, especially for entry-level positions that were hardest hit during the slow period.
In a report published on October 21, Bachaud stated that companies that prioritize skills, invest in their employees, and adjust to new technology will have a competitive advantage in attracting top people as the market changes.
In contrast to the post-pandemic labor market recovery, there were only 7.2 million job opportunities in August, compared to 7.4 million individuals without jobs, according to Business Insider.
At times, workers are forced to accept jobs that may not be a good fit for their skill sets, experience, or expected salary. Employee advancement within the company is likewise more difficult when turnover is low.