By For lower-earning Americans, the pace of hiring remains strong, holding steady above its pre-pandemic baseline even as the demand for higher-income workers has waned slightly, according to new data from Vanguard.
The hire rate for the bottom one-third of workers by income, those who earn less than $55,000 a year, was 1.5% in March, the rate at which it’s largely hovered since September 2023, according to a new Vanguard analysis.
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The hires rate gauges the number of new hires against a share of existing employees.
By comparison, that rate for the lower third of workers by income was lower — hovering between 1.2% and 1.3% — in the months leading up to the Covid-19 pandemic, Vanguard found.
“This is partly a reflection of lower-paying service industries still trying to recover from the COVID shock — a challenge since many of those workers have transitioned to higher-paying opportunities,” Adam Schickling, a senior Vanguard economist, said in the analysis.
Vanguard is among the nation’s largest 401(k) plan administrators. Its analysis is based on new enrollments in its 401(k) plans.
Meanwhile, higher earners have seen hiring decline modestly.
Workers with incomes of $55,000 to $102,000 saw their hiring rate decline to 0.5% in March from 0.6% in September. And those earning over $102,000 saw a bigger fall, from 0.6% in September 2023 to 0.4% in March, Vanguard said.
Higher-paying industries are “taking a considerably more cautious approach to hiring relative to the hectic 2021 to 2022 hiring surge,” Schickling said.
Conversely, hiring has boomed in sectors like health care and hospitality, which tend to be lower-paying industries, said Julia Pollak, chief economist at ZipRecruiter.
For example, there’s been significant demand for home caregivers, certified nursing assistants, medical technicians, patient transporters and other hospital positions, Pollak said. The health-care field has added more than 750,000 total jobs over the last year, a “huge, huge number” and about triple its pre-pandemic growth, Pollak added.
She said the pandemic also created a “FOMO economy” that boosted travel spending and, therefore, increased demand for jobs in hotels and other accommodation gigs.
“And these jobs can’t be automated,” which might insulate such workers from attempts at thinning out staffing that can result from company experimentation with artificial intelligence, she said.
The job market has broadly cooled from its scorching pace since 2022 after the U.S. economy reopened.
The U.S. Federal Reserve raised interest rates to their highest level in two decades to pump the economic brakes and rein in inflation. It’s unclear when the Fed might reduce borrowing costs.
However, the labor market remains strong and resilient by many metrics — and may be strengthening, Pollak said.
“I think a lot of the data points to a pretty hot 2024,” Pollak said. “The slowdown we saw in 2023 has not continued. Things have either stabilized or ticked up.”
Certain tailwinds seem to be propelling the labor market forward. For one, the “much-anticipated recession” didn’t materialize, and companies that took a wait-and-see approach regarding hiring and business investment now feel more confident about growing again, Pollak said.
Additionally, 2024 is the start of “peak retirement,” she said. The largest cohort of baby boomers is poised to reach age 65 between now and 2030.
This means companies must recruit a big wave of next-generation talent to replace departing workers, Pollak said.
However, risks remain in the near term.
Job openings have declined substantially from their pandemic-era peak, though they remain elevated from historic levels. Such a sharp decline in job openings without a corresponding jump in unemployment “is unprecedented, singular, and exceptional” in the post-war era, Nick Bunker, North American economic research director at job site Indeed, wrote earlier this month.
“But it’s not clear how much longer this miraculous trend can continue,” he wrote.
