Leaving your job for a better opportunity is often seen as a wise move for career progression and increased income. However, recent data shows that the once significant pay increases associated with job hopping are starting to dwindle.
According to a report by ADP, the median year-over-year pay increases for job switchers fell to 9% in September, marking the slowest rate of growth since June 2021. In contrast, workers who stayed at their jobs saw average pay increases of around 16%, more than double that of job switchers at their peak.
This data suggests that the financial benefits of changing jobs may not be as lucrative as they once were. The difference in wage growth between those who leave a job versus those who stay is at its slimmest margin since October 2020. This trend indicates a potential decline in the overall labor market.
Nela Richardson, ADP’s chief economist, commented on the findings, stating, “We are seeing a steepening decline in jobs this month. Additionally, we are seeing a steady decline in wages in the past 12 months.” These statements highlight the challenges faced in the current job market and the potential impact on workers’ financial prospects.
The ADP National Employment Report revealed that 89,000 private payroll jobs were added to the US economy in September. Although this figure may seem positive, it fell short of economists’ expectations, who anticipated job additions of 150,000 for the month. The report’s release coincided with a busy week for labor market news, including the Job Opening and Labor Turnover Survey (JOLTS) report, which unexpectedly showed an increase in job openings in August.
While the strong economy initially caused concern among investors and sent stock prices lower due to fears of increased interest rates by the Federal Reserve, there are indications of the economy cooling off. The hire rate in August remained unchanged from the previous month, and the quit rate also held steady, showing that fewer workers are actively seeking new job opportunities.
Sarah House, a senior economist at Wells Fargo, noted, “The improved rate of retention comes as the pay premium for switching jobs has narrowed and a declining share of workers view jobs as plentiful.” This observation suggests that the reduced willingness to change jobs and the narrowing pay divide will likely have an impact on wage pressures and job openings in the future.
The Federal Reserve has been monitoring these developments closely, particularly in its fight against inflation. Federal Reserve Chair Jerome Powell emphasized the need for a rebalancing of the labor market and more normal wage gains during his speech at the Jackson Hole Symposium. Powell stated that nominal wage growth must slow to a rate consistent with 2% inflation.
As more labor market data becomes available, analysts are eagerly anticipating the September jobs report, which is expected to show 170,000 added jobs and potential changes in the unemployment rate. Wage growth will also be closely watched, as it serves as an important indicator of workers’ influence in the labor market.
Overall, the declining pay increases for job switchers and the narrowing pay divide between job switchers and those who stay at their jobs reflect a cooling labor market. While leaving a job for a new opportunity may still have its benefits, it seems that the financial gains may not be as significant as they once were. As the labor market continues to evolve, it’s important for workers to consider all factors and carefully weigh the potential benefits and drawbacks before making career decisions.