American employees have lost their labour market leverage

Their pandemic gains are over as the power balance tilts away

- KATHRYN ANNE EDWARDS

Judging by the US unemployment rate of 4.1%, its labour market would appear to be thriving. This is about as good as it gets, economists would say, implying the economy is at or near full employment. Well, that's one way to look at it. Another is via the hiring rate, which is sending a signal that suggests a reversal of recent fortunes for the American worker.

That measure has been falling, dropping to 3.3% in November, a level that signals a labour market in recession. Yes, recession. Aside from a single month at the start of the pandemic, the hiring rate suggests that the labour market has not been this weak since it was struggling to crawl out of the deep 2007-09 recession, according to data from the US Bureau of Labor Statistics.

What's unusual currently is how these metrics are correlated. Indeed, there were 22 months between 2000 and 2022 in which the hiring rate was 3.3%, like now, and the average unemployment rate over those months was 8.2%, double the latest 4.1% reading.

The weak hiring rate means that the post-pandemic balance of power that gave workers leverage over employers, an immeasurable but vital force for improving wages and work conditions through better bargaining power, is now dead.

The post-mortem offers a lesson about markets, power and policy.