The pay gap between stayers and job switchers narrowed in May, in the latest sign that the US labor market is cooling from a hot start to 2024.
New data from ADP released Wednesday showed that average year-over-year wage growth for job-changers fell to 7.8% in May, down from a recent increase of 8.3% in March and 8% in April. The gap between wage earnings for job-changers and stayers, which grew at a 5% pace in May, is at its lowest level since February and far from 2022-2023 levels.
“We’ve seen that people’s willingness to jump from job to job has really declined over the last couple of years,” ADP chief economist Nela Richardson said on a conference call with reporters Wednesday morning.
Richardson noted that the trend of fewer people quitting their jobs for a big pay raise is not new, as she and other economists have tracked the transition from the “Great Resignation” to the “Great Attitude.” But recently there have been other changes. Companies are focusing more on retaining and training workers than recruiting, and as a result, prospective workers are finding it harder to find new jobs.
Read more: How does the labor market affect inflation?
“When I talk to employers, their story has changed a lot over the past year,” Richardson said. “Instead of being completely focused on hiring and replacing workers, they’re really focused on productivity, getting the most out of the workforce and having an engaged workforce.”
Richardson added that workers are still finding work. It just seems to be “taking a while”.
That dynamic is emerging after new data from the Bureau of Labor Statistics released Tuesday showed job openings hit their lowest level in more than three years in April. Notably, the ratio between the number of job openings and the unemployed returned to 1.2 in May, which is in line with pre-pandemic levels.
Richardson reasoned that these are signs of stabilization in the labor market. The question is whether this balance lasts or is a sign of a larger slowdown.
Data from ADP released Wednesday also showed that 152,000 private payrolls were added in May, lower than the 188,000 seen in April and below economists’ estimates of 175,000 additions.
Investors will get another update on the state of the labor market on Friday morning with the release of the May jobs report. The report is expected to show that 185,000 non-farm payroll jobs were added to the US economy last month with the unemployment rate holding steady at 3.9%, according to data from Bloomberg.
In April, the US economy added 175,000 jobs, while the unemployment rate rose 0.1% to 3.9%.
Bank of America US economist Michael Gapen projects a slightly stronger print, with his team estimating that 200,000 jobs were added in May, while the unemployment rate fell to 3.8%.
Gapen noted that this would reflect a “healthy but better balanced labor market”.
Josh Schafer is a reporter for Yahoo Finance. Follow him to X @_joshschafer.
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