Hiring stays strong for low earners — while job growth for middle- and high-earners slows, Vanguard finds

The pace of hiring remains strong for lower-earning Americans, holding steady above its pre-pandemic baseline even as the demand for higher-income workers has waned slightly, according to new data from Vanguard.

The hires rate for the bottom third of workers by income (who earn less than $55,000 a year) was 1.5% in March, where it has largely hovered since September 2023, according to a new Vanguard analysis.

The hires rate gauges the number of new hires as a share of existing employees.

By comparison, it was lower — about 1.2% to 1.3% — in the months leading up to the Covid-19 pandemic, Vanguard found.

“This is partly a reflection of lower-paying service industries still trying to recover from the COVID shock — a challenge since many of those workers have transitioned to higher-paying opportunities,” Adam Schickling, a senior Vanguard economist, said in the analysis.

Vanguard is among the nation’s largest 401(k) plan administrators. Its analysis is based on new enrollments in its 401(k) plans.

Meanwhile, higher earners have seen hiring decline modestly.

Workers with incomes of $55,000 to $102,000 saw their hiring rate decline to 0.5% in March from 0.6% in September; those earning over $102,000 saw it fall more, to 0.4% from 0.6% during that time, Vanguard said.

Higher-paying industries are “taking a considerably more cautious approach to hiring relative to the hectic 2021 to 2022 hiring surge,” Schickling said.

Conversely, hiring has boomed in sectors like health care and hospitality, which tend to be lower-paying industries, said Julia Pollak, chief economist at ZipRecruiter.

For example, there’s been significant demand for home-care givers, certified nursing assistants, medical technicians, patient transporters and other hospital jobs, she said. The health-care field has added more than 750,000 total jobs over the last year, a “huge, huge number” and about triple its pre-pandemic growth, Pollak added.

The pandemic also created a “FOMO economy” that led to a surge in travel spending and therefore increased demand for jobs in hotels and other accommodation gigs, Pollak added.

“And these jobs can’t be automated,” perhaps insulating such workers from the leaner staffing that can result from company experimentation with artificial intelligence, she said.

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

The U.S. Federal Reserve raised interest rates to their highest level in two decades to pump the economic brakes and rein in inflation. It’s unclear when they might reduce borrowing costs.

However, the labor market remains strong and resilient by many metrics — and may be strengthening, Pollak said.

“I think a lot of the data points to a pretty hot 2024,” Pollak said. “The slowdown we saw in 2023 has not continued. Things have either stabilized or ticked up.”

Certain tailwinds seem to be propelling the labor market forward. For one, the “much anticipated recession” didn’t materialize, and companies that took a wait-and-see approach regarding hiring and business investment now feel more confident about growing again, Pollak said.  

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

This means companies must recruit a big wave of next-generation talent to replace those departing workers, Pollak said.

However, risks remain in the near term.

Job openings have declined substantially from their pandemic-era peak, though remain elevated from historic levels. Such a sharp decline in job openings without a corresponding jump in unemployment “is unprecedented, singular, and exceptional” in the post-war era, Nick Bunker, economic research director for North America at job site Indeed, wrote earlier this month.

“But it’s not clear how much longer this miraculous trend can continue,” he wrote.