The final knell of the Great Resignation has sounded.this The latest data Data from the U.S. Bureau of Labor Statistics shows workers are quitting their jobs at the same rate now as they were six months before the pandemic.
We are witnessing another shift in the post-pandemic labor market. For a time, workers were changing jobs at a rate far higher than historical rates. Now, they are squatting and sticking with the same employer.
An in-depth examination of ADP salary data may explain the staying power of the “big stay” policy: workers who change jobs are no longer rewarded with raises.
Job hopping is no longer what it used to be
Money is the key driver behind the big resignation. In the spring of 2021, salary growth caused by job-hopping began to accelerate sharply. By June 2022, average annual growth for job hoppers reached a record high of 16.4%, as a combination of abundant job opportunities and labor shortages led to significant wage increases. Quit first gear. A worker who moves from one job to another.
Now, those growth are slowing down almost as fast as they are accelerating. The ADP Research Institute, which tracks the wages of about 22 million workers across the country, can distinguish between individuals who have been with the same employer for 12 months and those who quit to start a new job in the past year. We were able to compare salary trends for both groups.
For employed workers, the median annual wage growth rate peaked at 7.8% in September 2022. Since then, the annual median salary growth rate has steadily declined, reaching 5.9% in September this year, a decrease of 1.9 percentage points.
The ADP Pay Insights report tracks the trajectories of job-changers whose previous and current employers are ADP clients. For this group of job changers, wage growth has slowed even more.
After peaking at 16.4% in June 2022, median annual salary increases for job hoppers fell to 14.7% in January 2023. In September, typical salary increases were 9%.
That means job-hopping won’t be as rewarding as it was a year ago. We expect the gap between stayers and job-changers to narrow further.
Customer churn is slowing
In most cases, workers who resign do not leave the labor market but are employed elsewhere.
Less than 4% of employees in the past three months were new hires, which ADP defines as employees who have been with the company for less than three months. According to ADP data, there were more than twice as many new hires during the same period in 2022 (more than 9% of all employees).
The proportion of new employees in the overall workforce varies widely across industries. As expected, industries with more occupations requiring advanced training, such as construction and information technology, have a lower proportion of new hires than industries with lower skill requirements, such as retail, leisure and hospitality.
Over the past year, however, even industries with higher monthly turnover rates have seen a decline in the share of new hires. That suggests job losses are slowing.
For example, the rate of new hires in manufacturing was 9.9% in September. That’s the lowest level the ADP Research Institute has tracked in 47 months. New hires typically make up 11% of the manufacturing workforce.
Even service industries with historically high turnover rates, such as leisure, hospitality and business services, are seeing a decline in their share of new hires.
The luster of new hires is fading
When we look at a broad sample of workers who started a new job within the past three months, regardless of whether their previous employer was an ADP client, we see a deeper trend.
Salary growth for new employees has slowed to a near standstill. Compared with new employees in 2021, the salary of new employees in 2022 is expected to increase by 10%.
Now, annual wage growth for new hires has shrunk to just 2.9% in September. When we isolate new hires who are paid hourly (about 60% of the sample), wages change little: The median hourly wage for new hires has remained steady at $17 since February.
Pay isn’t the only reason employees quit. Improved job prospects, greater flexibility, better benefits, a more collaborative workplace, and management quality can all influence an employee’s decision to quit or stay. But as salary increases for new hires shrink, the decision to stay is more likely to become a decision to stick it out.
Nela Richardson is chief economist and ESG officer at ADP and director of the ADP Research Institute (ADPRI).
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