Why it pays a lot less to switch jobs right now: ‘That new-hire glow is fading’

In the current job market, the substantial salary increases and attractive sign-on bonuses that were prevalent during the "great resignation" era have significantly diminished. While there was a projected 10% surge in pay for new hires in 2022, recent data from ADP indicates a sharp decline in year-over-year pay growth, plummeting to just 2.9% in September. Nela Richardson, the chief economist at ADP, attributes the deceleration in wage growth to lower quit rates, an expanding labor supply, and decreasing worker demand.

Specific industries have been particularly impacted, with finance and technology experiencing stagnant or declining pay growth for new hires. In the finance sector, pay growth has virtually halted since July, while jobseekers in the technology sector have witnessed a consistent decrease in pay throughout 2023. This contrasts sharply with the previous "golden age for jobseekers," characterized by substantial salary increases and job opportunities.

An illustrative example is Chris Cicconi, who has been seeking remote sales positions, primarily at U.S.-based tech companies since late October after losing his job at an AI software firm. Despite numerous interviews and a few job offers, the salaries offered have been notably lower – in some instances, less than half – compared to his previous role, despite possessing the same title and level of experience. This situation contrasts starkly with his previous job search in 2021, characterized by an abundance of recruiter interest and greater salary negotiation flexibility.

The Indeed Wage Tracker echoes these trends, revealing that while October wages experienced a 4.2% year-over-year increase, this figure is significantly below the 9.3% spike observed in January 2022.  

“2021 and early 2022 really were the golden age for jobseekers,” says Cicconi, who lives in Montreal. “Now, the power’s swung back toward bosses and a lot of the benefits we came to expect during the ‘great resignation’ are gone now.”

Aerin Paulo has felt similar frustrations during her job search. Paulo, who lives in Connecticut, has been on the lookout for new marketing positions since the accounting startup she worked for suddenly closed down in September.

“I’ve noticed a lot more employers are being vague in when and how they discuss pay,” the 39-year-old says. “They’ll just say the salary is competitive or provide a comically large range, like $80,000-$250,000.” 

Organizations are walking a “delicate tightrope” right now, says Tom McMullen, a senior client partner at global consulting firm Korn Ferry. “Organizations don’t want to spend too much, but they know they can’t spend too little if they want to remain competitive, so they’re trying — and struggling — to find that sweet spot.”

Bosses are less likely now to give new hires pay raises because turnover has stabilized in most industries, and they’re concerned that paying them more than existing employees could drive existing employees to quit. 

“People that have continued to work for the same organizations through the ‘great resignation’ feel that they’ve been taking a loyalty discount because they didn’t switch jobs and, in many cases, are watching new hires at their organizations get generous offers,” McMullen, who leads Korn Ferry’s U.S. pay equity practice, explains. “No one wants to exacerbate pay equity issues when the hiring market has finally calmed down.”

Some employers are turning to low-cost benefits including fitness stipends, mental health resources and commuter benefits to lure talent in lieu of higher pay, McMullen points out.

“Three years ago, a lot of bosses’ hair was on fire, they couldn’t fill open roles fast enough,” he says. “Now, that the job market is cooling, there’s less reason to panic and more leverage with hiring.”

Richardson says that as the pay premium for new hires shrinks, the decision to stay is “more likely to be the one that sticks.”

Millions of "gig" workers may get missed every month in the U.S. government's employment report, a discrepancy with implications for how Federal Reserve officials size up the job market and any associated inflation risks.

Research prepared for a Boston Federal Reserve labor market conference found that whether driving for Uber to make ends meet or taking piecework jobs in retirement, casual contract workers sometimes don't consider themselves "employed" or even a part of the labor force.

As a result, they answer government survey questions in a way that may produce a significant undercount of those working, economists Anat Bracha, an associate professor at the Hebrew University Business School in Jerusalem, and senior Boston Fed economist Mary A. Burke concluded in a research paper to be presented at the conference on Friday.

The number could be just a few hundred thousand under the most constrained estimates or as many as 13 million, involving a swing of perhaps 5 percentage points in the share of the adult population that is working at least part-time, a figure the U.S. central bank watches closely.

Though that indicates the labor market at any time may be "tighter" than thought, the researchers said they felt it means the economy actually has more room to increase work and production without generating inflation - a case for the Fed to give the job market more room to run.

Particularly in the years before the coronavirus pandemic "inflation was not accelerating ... despite the substantial amount of hidden informal work that we document," Bracha and Burke wrote. As a result, "the benchmark for full employment could simply be adjusted upward."

The research involved reexamining the detailed responses to a New York Fed survey of "informal work" from 2015 through 2022.

In comparing parts of that questionnaire covering work obtained via online platforms or contract jobs with another section structured more like the Labor Department's monthly survey of employment status, they found the responses often didn't track. That left potentially millions slipping through a statistical crack.

It is a significant data gap for economists who, over the last decade, have debated, rehashed, challenged and revised the longstanding idea that inflation is often driven by low unemployment and the rising wages and spending that follow from it.

The jobless rate, as Bracha and Burke noted, continued falling throughout the 2010s without higher inflation, a fact that prompted the Fed to rethink its approach to monetary policy and not assume that inflation would rise once the unemployment rate got too low. Lately, inflation has been declining without a dramatic rise in the unemployment rate.


U.S. central bank officials, significantly including Fed Chair Jerome Powell, still see a connection between the jobless rate and inflation and feel there will need to be increased labor market "slack" for inflation to remain under control.

But how much slack?

As of early 2013, the bulk of Fed officials thought the "longer-run" unemployment rate, a proxy for the level of joblessness consistent with the central bank's 2% inflation target, was between 5.0% and 6.0%. In projections issued in September, Fed officials saw it between 3.5% and 4.3%, a dramatic shift.

The pandemic has kept that issue alive as the Fed tries to assess whether the U.S. is likely to remain in a perpetual labor shortage, absent some dramatic change in immigration policy, or enter an era where work from home, new automation techniques and other job market changes lead to more, and more productive, workers than anticipated.

After concern that the pandemic might permanently constrain women from working, for example, the overall number of women working surpassed the pre-pandemic peak of 74.9 million in January, and has grown another 1 million since. The participation rate for 25-to-54-year-old women hit a record 77% this year.

Researchers at the Boston conference say women might contribute even more to the nation's labor supply with stronger family and childcare policies.

Other research looked at how job training and policies towards employing those with a criminal record might help.

Bracha and Burke said gig workers might also have more to offer. Their research found many gig workers want additional hours of formal employment, suggesting more untapped labor supply.

"Our results indicate that potential hours - as well as potential GDP - were probably higher in recent years compared with official employment estimates," they wrote.

Boston Fed President Susan Collins, in opening remarks to the two-day conference, said getting estimates of employment right were central to the Fed's ability to meet its dual mandate of stable inflation while maximizing employment.

If labor supply is higher than thought or likely to expand as the job market tightens, "then higher levels of economic activity in such times may not generate additional price pressures requiring tighter monetary policy," Collins said. "And the higher levels of activity and participation can benefit those brought into the labor market, contributing to a vibrant economy that works for all."

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