The latest data from the Bureau of Labor Statistics indicates that workers are now quitting their jobs at a similar rate to the period before the pandemic, marking a shift in the labor market. Previously, there was a surge in job changes, but now workers seem to be staying with the same employer. A closer look at ADP payroll data reveals a possible explanation for this trend: job changers are no longer experiencing significant pay gains.
Money was a significant factor driving the Great Resignation, as job switchers were benefiting from substantial pay increases. However, these pay gains are now slowing down. The ADP Research Institute has been analyzing the pay trends of workers who have remained with the same employer for 12 months compared to those who have switched jobs. Median annual pay growth for job stayers reached a peak of 7.8% in September 2022 but has been steadily declining since then, reaching 5.9% in September 2023, reflecting a 1.9 percentage point decrease.
For job changers, the slowdown in pay gains has been even more pronounced. After peaking at 16.4% in June 2022, median year-over-year pay gains fell to 14.7% in January 2023, and by September, the typical pay increase was 9%. This indicates that job hopping does not yield the same financial benefits as it did just a year ago, and we anticipate the gap between job stayers and job changers to narrow further.
Furthermore, the rate of churn in the labor market has slowed down. Instead of leaving the job market entirely, most workers who quit their jobs are being hired elsewhere. In the past three months, new hires accounted for less than 4% of employees, while over 9% of workers remained in employment for more than three months.
Overall, these trends suggest a shift in the post-pandemic labor market, with workers showing a preference for job stability over job-hopping due to diminishing financial incentives. The Great Resignation seems to be coming to an end, and the dynamics of the labor market are evolving accordingly.