Signs of a less dynamic economy
A dynamic labor market reveals the extent of both gross job gains and gross job losses in the net employment growth. Over time, new goods and services and new production processes replace those that are older and less productive, generating job losses in some markets and job gains in others.
The job reallocation rate—defined as the sum of total jobs gained and total jobs lost divided by the total number of jobs in the economy—is an indicator of employment dynamism. The job reallocation rate peaked in 1998, followed by a long downward trend. The rate increased sharply at the onset of the pandemic, reflecting the tremendous increase in business closings, openings, contractions, and expansions. The current economic recovery has brought the rate down to levels similar to those seen prior to the pandemic.