Labor market pulse: Firms hiring at lower rates

Hiring continues to slow

Vanguard’s proprietary data on enrollments in 401(k) retirement plans indicate a slowdown in the hires rate, which measures new hires as a share of existing employees. “For firms with over 250 employees, the hires rate has been trending lower, dropping to 1.6% in October from 2.1% in April,” said Vanguard investment analyst David Pakula.

Similarly, the Job Openings and Labor Turnover Survey (JOLTS) report, published by the U.S. Bureau of Labor Statistics and adjusted to focus on firms with over 250 employees, reveals a comparable slowdown in hiring over the past year. The JOLTS rate decreased from 3.2% in January to 2.9% in September.

“A decrease in hiring usually accompanies a broader decline in the labor market, but we’re not really seeing that this time around,” said Vanguard senior economist Adam Schickling. “That’s likely because firms are still seeing decent worker productivity and don’t feel concerned about being overstaffed.”

Schickling added that “a challenging labor supply environment in 2025 means that only modest job growth will be needed to absorb new entrants to the labor force, effectively keeping the unemployment rate in the low 4% range.”

Post-COVID hiring trends appear to be returning to normalcy. With employee turnover stabilizing, firms are able to hire at lower rates, likely because of reduced attrition.

Vanguard data through October indicate that the hiring pace is decelerating

Notes: The Vanguard hires rate is calculated at the firm level and is based on new enrollments in 401(k) retirement plans administered by Vanguard divided by the number of all active 401(k) plan participants in a given month. New hires are recorded based on their hire date rather than their retirement plan enrollment date. The series is seasonally adjusted using the X-13ARIMA-SEATS method and transformed into a three-month moving average. The dataset represents a rolling two-year sample of firms with greater than 250 employees across all sectors of the economy that offer retirement plans that Vanguard has administered since January 2003. Job Openings and Labor Turnover Survey (JOLTS) data are based on a nationally representative survey of 21,000 nonfarm business and government establishments. JOLTS is adjusted to capture firms with greater than 250 employees. The two vertical bars indicate economic recessions, as identified by the National Bureau of Economic Research. JOLTS data are as of September 2024, and Vanguard data are as of October 2024.

Sources: U.S. Bureau of Labor Statistics and Vanguard.

Hiring for lower-income jobs weakens

Vanguard data indicate that the hires rate that has been robust for lower-income jobs—those with annual pay below $57,000—edged lower, to 1.2%, in October from a recent high of 1.4% in June. “This slowdown stands in contrast to hiring for middle- and high-income jobs, which has remained steady at around 0.6% to 0.7%, respectively, for more than a year,” said Pakula.

“Hiring activity for lower-income jobs continues to normalize following the pandemic recovery,” Schickling explained. “While it remains above the rates for higher-income workers, the recent decline reflects more modest hiring in sectors like retail trade and leisure and hospitality.”

The hires rate for low-income jobs continues to normalize postpandemic

Notes: The hires rate by income percentile refers to new hires as a share of existing employees. The Vanguard hires rate is calculated at the firm level and is based on new enrollments in 401(k) retirement plans administered by Vanguard divided by the number of all active 401(k) plan participants in a given month. The hires rate series is seasonally adjusted using the X-13ARIMA-SEATS method and transformed into a three-month moving average. Income is inferred from data on participants’ 401(k) plan savings-rate elections and realized contributions. Data are reported on a lag because of data coverage limitations.

Source: Vanguard, as of August 2024.

About Vanguard hires data

Total hires and hires by income have several methodological differences due to data limitations when pairing firm hires rates with worker attributes. The total hires chart ends in October 2024 and contains a rolling sample of 1,453 firms for which Vanguard provided 401(k) plan recordkeeping services for the prior 24 months. We also use the X-13ARIMA-SEATS adjustment to remove seasonal patterns in the data. The income-based chart plots data through August 2024 and is based on a monthly cross-section of 401(k) clients because of data availability constraints. The income cut reflects a monthly sample of 1,749 firms. For both charts, we calculated a three-month moving average in addition to the X-13ARIMA-SEATS adjustment to smooth the data given sample-size limitations. These methodological differences may lead to differences in trends between the aggregate hires chart and the income-based chart.

Vanguard hires data do not capture the whole U.S. economy, since roughly only half of earners—a group disproportionately composed of higher-income earners—have access to employer-sponsored retirement plans. Moreover, employers that offer 401(k) plans tend to be larger, more mature, and concentrated in certain industries.