Labor market pulse: Hiring is moderating

Some moderation in hiring

Vanguard’s proprietary data on enrollments in 401(k) retirement plans point to a recent slowing in the hires rate—which refers to new hires as a share of existing employees—after reaching a 2024 peak of 2.5% in April.

The Job Openings and Labor Turnover Survey (JOLTS) report, published by the U.S. Bureau of Labor Statistics, indicates a steadier slowdown in hires over the course of 2023 and 2024. Government data showing a hiring decline this year and a rise in the unemployment rate from 3.5% in July 2023 to 4.1% in June 2024 have stirred fears of a U.S. recession.

“Historically, a 0.6-percentage-point increase in the unemployment rate has warranted caution,” said Vanguard senior economist Adam Schickling. “But when we consider the broader macroeconomic environment, private employment data, the strength of wage growth, the still-elevated number of job openings, and our own hiring data, we anticipate continued economic momentum and a firm labor market.”

Vanguard data through June 2024 indicate the pace of hiring has moderated in recent months

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 of all sizes across all sectors of the economy that offer retirement plans, which 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. The two vertical bars indicate economic recessions, as identified by the National Bureau of Economic Research.

Source: Vanguard, as of June 2024.

A positive turn in hiring for mid- and high-income earners through April 2024

The hires rate for the bottom third of earners—those with annual pay below $55,000—has generally been well above that of higher earners in recent years. “Data for January through April 2024, however, suggests that mid- and high-income earners are experiencing a modest pickup in hiring,” said Vanguard investment analyst David Pakula.

Note that our data on hires by income group is as of April 2024 because of data availability. The total hires data is available through June 2024. Also, note that Vanguard retirement plan participants typically have higher incomes than the broader U.S. population.

Hiring has leveled off for all income groups over the last year

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) savings-rate elections and realized contributions. Data is reported on a lag because of data coverage limitations.

Source: Vanguard, as of April 2024.

About Vanguard hires data

Total hires and hires by income have several methodological differences due to data limitations when pairing firm hire rates with worker attributes. The total hires chart ends in June 2024 and contains a rolling sample of 1,269 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- and age-based charts plot data through April 2024 and are based on a monthly cross-section of 401(k) clients because of data availability constraints. The income cut reflects a monthly sample of 1,745 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 hire 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.