The Effects of a “Low-Fire, Low-Hire” Economy on Workers

In September 2025, Fed Chair Jerome Powell stated in an FOMC press conference that the U.S. economy was in a “low-firing, low-hiring environment.” But what does that mean? In big-picture terms, it means firms have substantially reduced the number of workers they are actively hiring while also reducing the number of workers they are firing.

To quantify this environment and put it into historical perspective, we can use data from the Bureau of Labor Statistics (BLS). The BLS calculates the hiring and firing rates as the total number of hires and fires (formally, layoffs and discharges) for a given month divided by the number of employees who worked during, or received pay for, that month.The BLS defines those who “received pay” for a particular month as individuals who received pay for the pay period that includes the 12th of the month. As Chair Powell noted, these rates have fallen to very low levels by historical standards.

This can be seen in the figure below from online economic database FRED, which plots the hiring and firing rates since December 2000, the earliest date for which the BLS has released this data. As of December 2025, the hiring rate stood at 3.3%, while the firing rate stood at 1.1%. These numbers are substantially lower than previous peaks. For example, the hiring rate was 6.1% in 2020 and 4.1% as recently as early 2023. For the firing rate, the December 2025 value falls well below the peak of 8.6% in 2020, when the COVID-19 outbreak led to widespread job displacement. It also falls significantly below the previous peak of 2.0% dating back to 2009, during the Great Recession.

As noted earlier, Chair Powell’s comment was not just that hiring and firing rates were low, it was that they have been at some of their lowest levels on record. December 2025 hiring rates were just 0.5 percentage points from the historical low of 2.8% in June 2009, which was the trough of the Great Recession. In addition, the firing rate was 1.1%, comparable with its lowest value of 0.9% in May 2021, which the rate has hovered around since.

This “low-fire, low-hire” balance is reflected across other labor market measures as well. Total nonfarm payroll growth slowed to just 0.11% for calendar year 2025 (as shown in the next FRED chart).

Nominal wage growth has also cooled. (See the third FRED chart.) As of the last quarter in 2025, year-over-year growth in nominal wages for private industry workers was approximately 3.4%. In the current “low-fire, low-hire” economy, workers are increasingly staying put in their jobs, breaking the post-COVID-19 pandemic trend of frequent job-switching. In August and October 2025, for example, the quits rate dropped to a low of 1.9%.

The Position of Those without Full-Time Work

With the labor market growing stagnant, where does that leave unemployed people and those forced into part-time employment? In November 2025, the number of those who wanted full-time positions but could only find part-time work hit 1.65 million, the highest it had been since January 2018. The data show long-term unemployment is also rising. About a quarter of unemployed individuals had been jobless for at least 27 weeks as of December 2025, the highest percentage in nearly four years.

Employed individuals are experiencing the downsides of a “low-fire, low-hire” economy as well. Year-over-year growth in wages has been falling since the second half of 2022, a result induced by the high-competition, low-demand landscape of the current labor market.

Conclusion

Since the spring of 2021, the U.S. labor market has been cooling. Over this period, the unemployment rate has remained relatively steady, moving closely around 4%, which is generally considered in line with the Federal Reserve’s goal of maximum sustainable employment. The relatively on-track unemployment rate, however, does not reveal the increasingly difficult hiring landscape that unemployed and underemployed people face. Long-term unemployment is on the rise, and more individuals are working part-time when they’d rather obtain full-time positions.

Note

1. The BLS defines those who “received pay” for a particular month as individuals who received pay for the pay period that includes the 12th of the month.