Vanguard’s proprietary data on enrollments in 401(k) retirement plans indicate the pace of hiring has increased recently. The hires rate—which refers to new hires as a share of existing employees—climbed to 2.4% in February 2024, a return to just shy of its level in June 2023.

“We are seeing a turning point in the data with the recent uptick in hiring,” said Vanguard Investment Analyst David Pakula. “That said, employers are still hiring at a slower pace than during pre-pandemic times and the tight labor market of 2021 and 2022.”

The hires rate according to the Job Openings and Labor Turnover Survey (JOLTS), published by the U.S. Bureau of Labor Statistics, has been trending down recently, with its latest reading at 3.6% in January. Similarly, Vanguard data showed a general slowdown in hiring in 2023, prior to the recent increase. 

“Using our proprietary data, we can now look at hiring trends by income level—a view that’s not available in public datasets—to offer a more nuanced view on the dynamics of the labor market through October 2023,” said Pakula.

Our Vanguard 401(k) data indicate that hiring rates for the bottom third of workers, who make below $55,000 per year, are generally higher than those for higher-income workers. This is consistent with JOLTS data showing greater labor market churn in lower-wage sectors, such as leisure and hospitality and retail trade.

In addition, the hires rate for the bottom income tercile of workers has gained momentum over the last few months for which we have data. In contrast, hiring for the middle and top third of employees declined throughout 2023. (Incomes for Vanguard retirement plan participants generally skew higher than those for the general population.) Thus, the decline in the overall hiring rate in 2023 appears to have been driven by a slowdown in hiring among middle- and higher-income workers.

“While hiring rates for high-income workers are slowing, we haven’t seen a material pickup in the unemployment rate for that income group,” said Adam Schickling, a senior Vanguard economist. “We’ve seen layoff announcements for high-income workers, most notably in the technology sector, but they have often been able to quickly find new employment as their skills are in demand.” 

Strong demand for lower-income workers has coincided with faster growth in wages for that group than for most higher-income workers. During the onset of the pandemic, lower-income workers concentrated in face-to-face services sectors were more at risk of layoffs than higher-income earners who had more flexibility to work remotely.

Ultimately, however, a combination of elevated consumer demand from fiscal stimulus and many face-to-face services sector workers transitioning to other industries led to worker shortages being the most severe in lower-income occupations, which drove wages for that work significantly higher. At the same time, many higher-income workers accepted slower wage growth as a tradeoff for remote work flexibility. These dynamics have all contributed to the faster rise in wages for lower-income workers.¹

Our labor market analysis supports our economic forecast of a resilient U.S. consumer—thanks in part to higher real wage growth, particularly for lower- and middle-income workers—and above-trend GDP growth in 2024. 

Vanguard’s proprietary hires data are rooted in real-world 401(k) retirement plan participant data.

It should be noted that Vanguard hires data do not capture the whole U.S. economy, since roughly only half of workers—a group disproportionately composed of higher-income workers—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. 

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• Investor Pulse: Optimism for 2024 (article, issued January 2024)