Low-income hiring remains strong, Vanguard finds

For lower-income Americans, the pace of hiring remains strong, consistently above pre-pandemic levels, even as demand for higher-income workers has softened slightly, according to new data from Vanguard.

The hiring rate for the bottom one-third of workers, those earning less than $55,000 a year, was 1.5% in March, a rate that has mostly fluctuated since September 2023, according to a new Vanguard study. analysis.

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The hiring rate measures the number of new employees relative to the proportion of existing employees.

By comparison, the rate for the bottom third of earners was lower — fluctuating between 1.2% and 1.3% — in the months leading up to the Covid-19 pandemic, Vanguard found.

“This is partly a reflection of low-wage service industries still struggling to recover from the shock of Covid-19. That’s a problem because many of these workers have moved on to higher-paying opportunities,” Adam Schickling, senior economist at Vanguard, said in his analysis.

Vanguard is among the largest 401(k) plan administrators in the country. His analysis is based on new enrollments in 401(k) plans.

Meanwhile, higher-income people have seen a modest decline in hiring.

For workers earning between $55,000 and $102,000, the hiring rate fell to 0.5% in March from 0.6% in September. And for those earning more than $102,000, the drop was even steeper, from 0.6% in September 2023 to 0.4% in March, Vanguard reports.

Higher-wage industries are “taking a significantly more cautious approach to hiring compared to the hiring surge in 2021-22,” Schickling said.

Conversely, hiring has surged in sectors such as health care and hospitality, which tend to be lower-paying industries, said Julia Pollack, chief economist at ZipRecruiter.

For example, there is significant demand for home health aides, registered nurses, medical technicians, patient transporters and other hospital positions, Pollack said. The health care industry added more than 750,000 jobs over the past year, a “huge, huge number” and about three times pre-pandemic growth, Pollack added.

She said the pandemic has also created a “FOMO economy” that has increased travel costs and therefore increased demand for jobs in hotels and other accommodations.

“And those jobs can’t be automated,” which could insulate such workers from downsizing efforts that could result from the company’s experiments with artificial intelligence, she said.

The job market as a whole has cooled from its scorching pace since 2022 after the U.S. economy reopened.

The US Federal Reserve raised interest rates to their highest level in two decades to slow down the economy and curb inflation. It is unclear when the Fed will be able to lower borrowing costs.

Still, the labor market remains strong and resilient by many measures and may be strengthening, Pollack said.

“I think a lot of the data points to a pretty hot 2024,” Pollack said. “The slowdown we saw in 2023 did not continue. The situation has either stabilized or gone up.”

Certain tailwinds appear to be moving the labor market forward. First, the “long-awaited recession” has not materialized, and companies that took a wait-and-see approach to hiring and business investment are now feeling more confident about new growth, Pollack said.

Additionally, 2024 will mark the start of “peak retirement,” she said. The largest cohort of baby boomers will reach age 65 between now and 2030.

That means companies must hire a large wave of next-generation talent to replace departing workers, Pollack said.

However, risks remain in the near future.

Job openings have fallen significantly from their pandemic-era peak, although they remain elevated compared to historical levels. Such a sharp reduction in vacancies without a corresponding jump in unemployment.”is unprecedented“, exceptional and exceptional” in the postwar era, wrote Nick Banker, director of North American economic research at Indeed, earlier this month.

“However, it is unclear how much longer this wonderful trend can continue,” he wrote.