Despite the ongoing hiring spree by employers, pay increases for new hires are lagging behind, according to data from ADP.
ADP, the payroll service giant, surprised everyone by revealing that private sector employers added 497,000 jobs in June. This figure is more than double the forecast made by economists polled by the Wall Street Journal.
However, amidst all this hiring activity, job changers in June experienced just over an 11% increase in median annual pay. In contrast, during the same period last year, they enjoyed a pay increase of over 16%.
For those who remained in their current jobs, the median annual pay saw a more modest increase of over 6% in June, down from 7.7% compared to last year. Their median pay stood at $57,400, as reported by ADP.
So, while there is still some financial advantage in accepting a new job, it seems that this benefit has been diminishing over the past year.
This trend is consistent across various industries. The leisure and hospitality sector, for example, exhibits the fastest pay growth, but even that growth is decelerating.
According to ADP’s data, the median year-over-year change in annual pay increased by nearly 8% in June. However, this growth rate is considerably lower than the almost 17% increase recorded in March.
Nela Richardson, ADP’s chief economist, highlighted that consumer-facing service industries performed well in June and contributed to higher-than-expected job creation. However, wage growth in these industries continues to decline, suggesting that hiring may have peaked after a late-cycle surge.
While the number of jobs added may not indicate it, there are indications of a cooling job market on the horizon.
Slowing Wage Growth and Job Listings: A Look at the Current Labor Market
The Federal Reserve Bank of Atlanta has recently released data indicating a slowdown in wage growth for individuals changing jobs. According to the researchers at the Atlanta Fed, the median wage growth for job switchers has dropped to 6.8%, compared to 8.5% last July.
Adding to this concern, the Bureau of Labor Statistics reported that job listings have fallen to a two-month low of 9.8 million in May, down from 10.3 million in April. This decrease is noteworthy considering that there were a record-breaking 12 million job openings just last year. Additionally, the number of job quits reached 4 million in May, returning to this level for the first time in five months.
While these statistics may suggest that the pay incentives for changing jobs are becoming less attractive, it is important to note that the current labor market still favors job seekers. Nick Bunker, the research director for Indeed Hiring Lab, states that although recessions can occur, demand for new hires remains high, and employers are still holding onto their existing workforce.
While there are various potential scenarios that could lead to a recession, it is presently unlikely. Bunker emphasizes that this knowledge should bring comfort to job seekers, employers, and policymakers moving forward into the summer months.
That being said, caution should be exercised when making a job move solely based on the allure of a higher salary. Considerations such as the new boss’s management style, at-home and in-office work policies, and job security should all be taken into account. It may also be wise to focus on perfecting a pitch for a salary increase within the new position. Career experts suggest that employees should highlight their impact and contributions to demonstrate their value. Using inflation as a reason for a higher salary is not likely to impress the new boss, as demonstrated by Thursday’s ADP data.
In conclusion, individuals should approach job changes with careful consideration, weighing the potential risks and benefits. Despite the current slowdown in wage growth for job switchers, the labor market remains favorable for those seeking new opportunities.