Employers stopped raising pay years ago. Economists trace the freeze to a pandemic hiring boom that companies are now correcting
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White-collar workers held the leverage in 2021. Companies chased talent with signing bonuses, remote-work perks, and raises bigger than anything the job market had produced in a decade. That leverage is gone now. Pay has stalled, job duties have widened, and for a growing share of workers, the role itself feels temporary.
The unemployment rate for tech workers hit 3.3% in 2025, according to the Bureau of Labor Statistics. For managers and other white-collar professionals, it sat at 2.5%. Both rates are climbing even as companies add jobs.
Unemployment and hiring can rise together because the supply of job seekers is growing faster than the supply of jobs. And that imbalance traces back to a boom that was never built on solid ground. Pay that high and hiring that aggressive can't last, and the market has been correcting back toward something more durable ever since.
In an emergency response to the pandemic, the Federal Reserve cut its key interest rate to nearly zero on March 15, 2020. The effect on hiring took time to show up. When it did, it was immense.
In November 2021, a record 4.5 million workers walked away from their jobs, betting they could find a better one, and with openings at a series high of 11.4 million that December, the odds were in their favor. Tech companies and other knowledge-related fields were outbidding each other for workers and offering outsize salaries.
Ron Hetrick, principal economist at Lightcast and a former BLS economist, calls the period a mirage. "Compared to 2021 and 2022, the party has ended, and now people are feeling the hangover," he said in a Lightcast analysis. "People think things are terrible now, but looking at the economy as a whole, we're not seeing that in the data. Things are fantastic, but we lost track of what 'fantastic' was when we experienced something completely unrealistic in '21 and '22."
Remote work compounded the effect. The share of paid workdays spent at home rose five-fold between 2019 and 2023, from about 5% to 25%, researchers found in the Survey of Working Arrangements and Attitudes. That shift widened the talent pool for employers. It also gave workers geographic arbitrage: A professional in a low-cost area could command a salary benchmarked to a pricier market. When companies began issuing return-to-office mandates and tightening headcounts, that spread started to close.
Meta $META's Mark Zuckerberg and Salesforce $CRM's Marc Benioff admitted to overhiring during the pandemic, and Google $GOOGL CEO Sundar Pichai accepted responsibility for staffing decisions that led Alphabet to cut 12,000 positions. Amazon $AMZN, Microsoft $MSFT, and Meta each eliminated thousands of jobs in a three-month span. The average tenure of laid-off workers was about two years, suggesting the cuts reversed pandemic-era hiring directly.
The pullback reached well beyond those three companies. Revelio Labs, a labor analytics firm, found that job postings for white-collar roles fell 35.8% between the first quarter of 2023 and the first quarter of 2025, with postings for software developers and business analysts dropping at roughly twice that rate.
Even while the boom was still inflating salaries, real pay was already falling behind. The Atlanta Fed's Wage Growth Tracker showed year-over-year nominal wage growth peaking at 6.7% in mid-2022, far above the 3.6% average of 2019. But inflation outran it. The BLS reported that real average hourly earnings fell 1.7% from January 2021 to January 2022, even as the headline raises looked historic. As of May 2026, real average hourly earnings are down 0.7% year-over-year, and real average weekly earnings are down 0.4%.
Real wages have been falling for years, but the number printed on the paycheck almost never does. Economists call this downward nominal wage rigidity: firms avoid cutting base pay because the damage it does to morale and retention outweighs whatever it saves. A Federal Reserve Board study documented "a significant amount" of this rigidity in the United States, finding that most companies simply hold pay flat from one year to the next rather than raising or cutting it. Employers would rather freeze pay than lower it.
Aaron Terrazas, Glassdoor's former chief economist, described the practical result as "white-collar shrinkflation." Benefits shrink, bonuses and stock grants get trimmed, and job scopes expand with no corresponding raise.
The squeeze hits hardest at the entry point. As of early 2026, 41.5% of recent college graduates were working jobs that don't require a degree, the Federal Reserve Bank of New York found. Hetrick calls this elite overproduction, a glut of degree-holders chasing too few jobs that actually require a degree.
Workers across every age, income, and education level have grown more afraid of losing their jobs. The New York Fed's Survey of Consumer Expectations found that the average worker's confidence in finding a new job after losing the current one fell to 43.7% in May 2026, the lowest reading since December 2025. Job loss expectations rose to 15.1%, above the 12-month average.
Even the Federal Reserve has stopped describing the labor market as a clean return to normal. Chair Jerome Powell called the economy "very unusual" in December 2025, warning that the job market may already be weaker than the official numbers show. He told reporters that hiring had slowed so sharply the Fed believed monthly job growth was overstated, and that actual job creation might already be negative.
Whether the squeeze feels like a catastrophe depends entirely on the comparison. The workers who feel cheated are the ones who came up during the boom and took its terms as the norm. They built their expectations around a moment, and the moment passed.
The graduates entering the workforce this year carry no such memory. They never saw the signing bonuses or the bidding wars, so they have nothing to mourn. For them, a degree buys less and the job piles on more work for the same pay. That's simply the way things are. It's the only baseline they'll ever know.
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