The median pay increase for workers switching jobs sank substantially to 4.8% last month from a pinnacle of 7.7% two years ago, according to recently released data from the Atlanta Fed.
While job changers tend to receive higher pay increases than job stayers, the gap between job stayers and those who switch roles has fizzled and is now at its lowest level in a decade. A worker who stayed put and received an annual raise saw nearly the same bump in pay — 4.6%, the Atlanta Fed found.
“The pendulum is swinging back from the pandemic premium for new hires,” Julia Pollak, chief economist at employment search site ZipRecruiter, told Yahoo Finance.
“The gap between wage growth for job switchers and job stayers ballooned to the widest gap on record during the Great Resignation,” she said. “Companies rushed to rehire after the pandemic, and the No. 1 focus was on hiring incentives — signing bonuses and raising starting pay.”
The problem is that many companies felt burned by offering huge salaries and bonuses to people who stayed only a short while and then left for better opportunities.
Now the focus is on longer-term retention incentives such as retirement and health insurance benefits that make workers want to stay, Pollak said.
Federal job cuts and layoffs by large companies are contributing to a chilly job market overall, flashing the warning signs that the golden era for job seekers has ground to a halt. A recent Harris Poll found that 7 in 10 Americans think it’s difficult to find a better position than the one they have now — and three-quarters say employers hold the power in the market.
“Hiring is so weak and unemployment durations are growing,” Pollak said. “Employers are opportunistically able to pick up great talents on the cheap.”
Talk about glum. A record-low 13% of job seekers described their search as going well, per the findings in a new ZipRecruiter report. Gloomier still — more than 6 in 10 job seekers reported zero job offers, the highest level in three years.
In 2022, wage growth contributed to people quitting their jobs for higher-paying options, Allison Shrivastava, an economist at the Indeed Hiring Lab, told Yahoo Finance.
“At that time, finding a new job was easy for most, and companies had to compete to hire workers. Now, that competition has greatly decreased,” she said. “This shift … has made leaving their current job for a new one less attractive.”
The data backs that up. Workers are staying in their current jobs, as seen with the low quits rate tracked by the Bureau of Labor Statistics — 2.1% or 3 million people quit in January.
“The labor market is on ice,” Shrivastava said.
Another more recent cause of that cooling is the result of mixed messages about where things are going.
“Confusion and uncertainty (are) causing workers and companies to hold onto jobs and workers, while at the same time holding off on expanding their labor force,” she said. “This freezing can only last so long until the market gets frostbite, leading to an increase in layoffs or a further slowdown in hiring or quitting.”
On a brighter note: It could also be that some people were able to find roles that were a better fit for them in 2022 when job switching was commonplace, and they are happy where they are, Shrivastava said. “Either way, it’s clear that people are going to be staying in their current jobs for longer.”
One caveat that can impact those lower starting salary figures: When people change fields, they tend to take a pay cut initially. And plenty of folks have been doing just that.
(Getty Creative) ·Thana Prasongsin via Getty Images
During the pandemic many workers had time to do some soul-searching about what they really wanted to do, and the number of those transitioning to new careers has risen.
“Only about 30% of job seekers say they want to switch industries, but more than 50% of recently hired workers got their jobs in a new industry,” Pollak told me.“That suggests that workers who keep an open mind, expand their search, invest in new skills, and follow opportunity are disproportionately successful.”
Have a question about retirement? Personal finances? Anything career-related? Click here to drop Kerry Hannon a note.
Whether you’re a career switcher or simply a job shifter, it’s not always about the money.
“Many job jumpers leave not just for money,” Jayne Mattson, a career coach, told me. “They leave companies because they aren’t getting any professional development or growth, or they found employment during COVID and it is not the right role and they want to find a better fit.”
Mattson’s advice for job seekers: Before you start your search, think of what you want in your next role and what it looks like.
“When people are leaving their job, I always ask, ‘What do you hope to get in your next role that you are not getting now?’ If they’re not clear of what they want to do, what their values and interests are, how will they know if they get an offer that is the right one?”
Kerry Hannon is a Senior Columnist at Yahoo Finance. She is a career and retirement strategist and the author of 14 books, including “In Control at 50+: How to Succeed in the New World of Work” and “Never Too Old to Get Rich.” Follow her on Bluesky.
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