How the Frozen Labor Market Is Impacting Agency Recruitment  

• August 13, 2025

By Claudia St. John

In the past, hiring firms could reliably anticipate booms and busts. When the economy was poised for growth, clients would call us to ramp up hiring and prepare for expansion. When a downturn loomed, they would seek our help with layoffs or compensation adjustments.

But the trend we’re witnessing now is unlike anything we’ve seen before—and it’s likely affecting your business, too.

From the Great Resignation to the Great Freeze

The COVID-19 pandemic unleashed a turbulent period in the labor market. In 2021, the U.S. experienced the “Great Resignation,” with more than 25% of the workforce—approximately 40 million people—quitting their jobs. Businesses scrambled to fill roles and retain talent, driving up wages and profitability. As the cycle continued, those wage hikes fueled increased consumer spending, which led to higher prices and, ultimately, inflation.

To combat inflation, the Federal Reserve raised interest rates, making it more expensive for businesses to borrow and invest. Traditionally, this would trigger a familiar cycle: Companies would cut back on hiring and layoffs would follow, pushing the economy toward recession.

Yet, this time, something different happened.

While companies did slow their hiring and pull back on investments, they stopped short of mass layoffs. The U.S. unemployment rate, which soared to double digits after the Great Recession in 2008, has remained remarkably low, hovering around 4% since the onset of the pandemic. Layoffs have stayed at historic lows even as profitability declined and borrowing costs rose in 2023 and 2024.

Why? Because employers, scarred by the difficulty of hiring during the post-pandemic boom, are reluctant to let go of workers they may need again soon.

I have experienced this firsthand. During my keynote speeches to business leaders across sectors, I typically ask three questions:

“How many of you have struggled to fill key positions?” Most hands go up.

“Have you had to increase pay to hire or keep employees?” Again, most hands go up.

“Are you planning layoffs?” Almost no hands go up.

This pattern is consistent across industries and the reason is structural. The U.S. workforce is shrinking as baby boomers retire, and we’re not adding enough new workers to replace them. Younger generations are smaller and immigration hasn’t filled the gap. The result is a labor market where openings persist, but hiring and quitting have both slowed dramatically.

What we’re seeing now is a “frozen” or “locked-in” labor market. Hiring has stalled, voluntary quits have plummeted and layoffs remain rare. Companies are holding onto their employees, even if business is slow, because the risk of not being able to rehire is too great. Meanwhile, workers are staying put, wary of making a move in an uncertain environment.

This freeze is blocking the normal flow of opportunity. Early-career workers can’t break in, experienced employees can’t move up and burned-out staff feel stuck.

Moreover, President Donald Trump’s recent policy changes, including new tariffs and shifts in immigration enforcement, have only exacerbated uncertainty for businesses, causing many to take a “wait and see” approach rather than making bold moves. As a result, job postings linger for months without being filled and interviews drag on with no clear end in sight. For job seekers, especially recent graduates, this means longer searches and fewer opportunities.

Talent Acquisition Strategies for the Great Freeze

Now is the time to rethink your talent strategy. Don’t assume the labor market will thaw soon or that old hiring patterns will return. Instead, take the following actions:

1) Start thinking strategically about your workforce. Now is not the time to move from a proactive to a reactive approach to your long-term workforce strategy. Focus on retaining your best people, investing in their growth, and creating a workplace culture that values flexibility, learning and well-being.

2) Don’t put off hiring talent. It will take longer than you anticipate to fill key positions. And once the market turns, you’ll face stiff competition and will have to pay more for the people you want to hire.

3) Consider broadening your recruitment efforts. Intentionally include underrepresented groups, veterans or those seeking non-traditional work arrangements. Now is a great time to hire entry-level talent as a long-term investment. Train them how you want things to be done and let them grow within the company while giving them the freedom to challenge current practices. This can help companies consider new, more effective ways of doing things.

4) Embrace technology and automation. Free up your team for higher-value work, but remember that people—skilled, motivated and engaged—are still your most valuable asset.

The “frozen” labor market isn’t just a passing phase—it’s a sign of deeper demographic and economic changes. By understanding what’s happening and responding strategically with creativity and flexibility, you can navigate this new reality and come out ahead.

Claudia St. John is the founder and CEO of The Workplace Advisors. The Workplace Advisors is the endorsed HR partner of Big “I” Hires, the Independent Insurance Agents of Virginia, Big I New York, and Big I New Jersey.  

The Workplace Advisors offers HR support, from strategy development to execution.