From the 'Big Stay' to a 'no-hire, no-fire' freeze, labor markets are seeing sizable shifts

The global labor market is transitioning from the 'Great Resignation' to a 'Great Stay,' characterized by significantly reduced employee turnover and cautious hiring by firms amid economic uncertainty. In the U.S., this is evidenced by slowing nonfarm payroll growth of 73,000 in July and an unemployment rate ticking up to 4.2%, potentially incentivizing Federal Reserve interest rate cuts. A similar 'Big Stay' trend is observed in the U.K., where job vacancies fell 5.8% to 718,000 and economic inactivity remains high, as businesses defer hiring decisions due to rising costs and an unclear economic outlook, signifying a broader, more conservative corporate stance on workforce expansion.

Analysis

The labor markets in both the U.S. and the U.K. are exhibiting a significant shift from the post-pandemic 'Great Resignation' to a 'Great Stay,' a term coined by ADP's chief economist to describe a market with low employee turnover and cautious corporate hiring. This trend is characterized by a 'no-hire, no-fire' environment where firms, uncertain about the economic outlook, are freezing new hiring but are simultaneously reluctant to lay off existing staff due to the recent difficulty in sourcing talent. In the U.S., this dynamic is substantiated by slowing nonfarm payroll growth, which came in at a weaker-than-expected 73,000 in July, and a rise in the unemployment rate to 4.2%. These cooling indicators are significant as they may provide the Federal Reserve with a rationale to lower interest rates at its September meeting. A parallel trend is evident in the U.K., where job vacancies fell by 5.8% to 718,000 and economic inactivity remains elevated at 21% as of Q2 2025. This slowdown in British hiring is attributed to rising labor costs and pervasive economic uncertainty, causing businesses to postpone recruitment until the economic trajectory becomes clearer.

Key Decisions for Investors

• The weak U.S. jobs data, including the 73,000 payroll figure and 4.2% unemployment rate, strengthens the argument for a dovish Federal Reserve pivot, suggesting investors should consider positioning for potential interest rate cuts which could benefit fixed-income assets and rate-sensitive equities.
• Investors should exercise caution with sectors highly sensitive to the business cycle, such as recruitment and staffing firms, as the 'Great Stay' signals corporate hesitation to expand headcount and could translate into weaker revenue growth and margin pressure.
• The pronounced slowdown and business uncertainty in the U.K. signal heightened risk for domestic-facing British assets, warranting a more defensive stance or a focus on U.K. companies with significant international revenue streams until economic confidence recovers.