Hiring remains strong for low-income earners, Vanguard finds

For lower-income Americans, the pace of hiring remains strong and steady above pre-pandemic levels, even as demand for higher-income workers has declined slightly, new data from Vanguard shows.

The rent rate for the bottom third of workers as measured by income, those making less than $55,000 a year, was 1.5% in March, where it has largely fluctuated since September 2023, according to a new Vanguard analysis.

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The number of new employees measures the number of new employees compared to the percentage of existing employees.

By comparison, that rate for the bottom third of workers, as measured by income, was lower — ranging between 1.2% and 1.3% — in the months leading up to the Covid-19 pandemic, Vanguard found.

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

Vanguard is one of the largest managers of 401(k) plans in the country. The analysis is based on new enrollments in 401(k) plans.

Meanwhile, higher income earners have seen modest workforce declines.

Workers with incomes between $55,000 and $102,000 saw their hiring rate drop from 0.6% in September to 0.5% in March. And those making more than $102,000 saw a bigger drop, from 0.6% in September 2023 to 0.4% in March, according to Vanguard.

The higher-paying industries are taking a significantly more cautious approach to hiring compared to the hectic hiring wave of 2021 to 2022, Schickling says.

Conversely, workforces have exploded in industries like healthcare and hospitality, which tend to be lower-paying industries, said Julia Pollak, chief economist at ZipRecruiter.

For example, there is a high demand for home health aides, certified nursing assistants, medical technicians, patient transporters and other hospital positions, Pollak said. The health care industry added a total of more than 750,000 jobs over the past year, a “huge, huge number” and about three times as many as before the pandemic, Pollak added.

She said the pandemic also created a “FOMO economy” that boosted travel spending and therefore increased demand for jobs in hotels and other lodging gigs.

“And these jobs cannot be automated,” which could insulate such workers from workforce thinning efforts that could result from corporate experimentation with artificial intelligence, she said.

The labor market has largely cooled from its torrid pace since 2022 after the US economy reopened.

The US Federal Reserve has raised interest rates to their highest level in 20 years to slow the economy and rein in inflation. It is unclear when the Fed could lower borrowing costs.

However, the labor market remains strong and resilient in many ways – and may be getting stronger, 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 stabilized or accelerated.”

Certain tailwinds appear to be driving the labor market forward. First, the “long-awaited recession” has not materialized, and companies that took a wait-and-see approach to hiring and business investment are now more confident in their growth, Pollak says. Â Â

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

This means companies need to recruit a large wave of next-generation talent to replace departing employees, Pollak said.

However, risks remain in the short term.

Job openings are down significantly from their pandemic-era peak, though they are still high relative to historic levels. Such a sharp drop in vacancies without a corresponding jump in unemployment”is unprecedentedunique and exceptional” in the postwar era, Nick Bunker, North American economic research director at job site Indeed, wrote earlier this month.

“But it is not clear how long this miraculous trend can continue,” he wrote.