The labor market loosening in the US over the past 18 months—along with the specter of genAI automating knowledge-worker jobs—has released some of the intense pressure on managers around hiring, retention, and compensation. But the current moment—where workers are easier to hire, pressure to raise wages has decreased, and employees aren’t job-hopping—is likely more of a temporary respite rather than a long-term trend, according to by the McKinsey Global Institute. If McKinsey is right, in years ahead employers will have trouble finding enough workers and wage inflation will pick up again.
“You can catch your breath, but then be prepared for the next wave of tightness,” says , partner at the McKinsey Global Institute. Here is a transcript of our conversation with Madgavkar, edited for space and clarity: What this means is that if you are the leader of people in an organization that's actually trying to grow, you can't be complacent about the fact that labor market tightness has retreated from the peaks that we saw during Covid,. It has indeed retreated.
There are some high-profile layoffs and sectors that seem to be easing. But, in this work, we take a step back and we look at the underlying structural trend, the way the engine is moving, regardless of almost all of the noise. In that trend, we see a tightness that's almost at historical highs, minus the pandemic blip.
We see a long-term tightening trend with almost no exception across the advanced economies. We .
