You’ve heard of “quiet quitting.” Get ready for the “big stay.”
People who want to leave their current job in the hope of getting more money elsewhere are about to get a wake-up call.
The labor market is still humming, highlighted by the 339,000 jobs that the economy added in May, according to Friday’s jobs report. Forecasters were expecting 190,000 new jobs.
But even if many employers are still hiring, more data is stacking up to suggest a job switch is becoming less lucrative compared to a year ago. In other words, it can still pay more to land a new job — but the pay bump is thinning as recession worries keep nagging employers.
The May jobs report showed softening wage growth as inflation rates keep coming off the boil. Hourly wages climbed to $33.44, marking 4.3% yearly growth. That’s down slightly from the year-over-year growth in April, and sharply off 5.9% at one point last year.
Wage inflation is also lagging actual inflation. Consumer inflation increased 4.9% in April, although that’s down from a 5% year-on-year increase in March and also down from a 9.1% rate last summer, which was the fastest pace since 1981.
But separate research gets more specific about the salaries for people considering a move. It can still pay to move. A job switcher’s hourly wages grew by 6.9% year over year in April compared to the 5.7% for those who stayed at their job, according to the Federal Reserve Bank of Atlanta.
“‘This is the second month we’ve seen a full percentage-point decline in pay growth for job changers.’”
The monetary advantage to switching jobs appears to be lessening. In July 2022, a job switcher’s annualized wage growth was 8.5% compared to the 5.9% for job stayers, Atlanta Fed researchers said.
The payroll processing giant ADP
ADP,
showed the same trend. Someone who changed jobs had a more than 12% annual increase in pay as of May, down from approximately 16% during the summer of 2022, ADP said.
Pay growth “is slowing substantially” ADP chief economist Nela Richardson said when ADP released its May jobs data this week. “This is the second month we’ve seen a full percentage-point decline in pay growth for job changers.”
Richardson forecasts what he describes as a “big stay” where workers stick with their current role.
Job switchers received a median pay increase of 13% as of April, significantly less than the 20% they received “when the great resignation was in full swing,” a separate report by Bank of America BAC found.
So who makes the biggest increase when job hopping? Pay growth is strong for job switchers at the lowest end of the income ladder — those making under $25,000 a year — and it’s softest for households making over $100,000 a year, as well as younger workers in better paying jobs.
To be sure, job seekers “still have plenty of options and leverage,” said Paul McDonald, senior executive director for Robert Half International
RHI,
“If employers are hiring, they need to act fast and salaries and benefit packages need to be competitive,” he said. That includes providing options for flexible work arrangement and remote work, McDonald said.
Flexible work arrangements are a strong way to pull in new workers and maintain ranks, according to Mercer. One-third of surveyed workers would be willing for less pay in exchange for more job flexibility, according to the human resources consulting firm.
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