Vanguard finds low-income recruitment remains strong

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The pace of hiring among lower-income Americans remains strong, holding steady above pre-pandemic baselines, even as demand for higher-income workers declines slightly, according to new data from Vanguard Group.

The hiring rate for workers in the bottom third of earners (those making less than $55,000 a year) was 1.5% in March, a level that has hovered since September 2023, according to the latest data from Vanguard analyze.

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The hiring rate measures the number of new employees as a percentage of existing employees.

In comparison, in the months before the Covid-19 pandemic, the ratio was lower at around 1.2% to 1.3%, Vanguard found.

Adam Schickling, senior economist at Vanguard Group, said in an analysis: “This partly reflects the fact that the low-wage service industry is still trying to recover from the impact of the new crown epidemic, which is a challenge because many workers have turned to high salary job.

Vanguard is one of the largest 401(k) plan administrators in the United States. Its analysis is based on new enrollment in 401(k) plans.

High-paying industries adopt a “cautious approach”

Meanwhile, hiring among high earners fell slightly.

The hiring rate for workers earning between $55,000 and $102,000 fell from 0.6% in September to 0.5% in March; Vanguard said the drop was even greater for those earning more than $102,000, from 0.6% to 0.4%.

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Compared with the busy 2021-2022, high-wage industries are “taking a quite cautious approach to recruitment” Recruitment is booming,” Hicklin said.

Healthcare and hospitality industries boom

Instead, hiring is booming in industries that tend to have lower wages, such as health care and hospitality, said Julia Pollak, chief economist at ZipRecruiter.

For example, home caregivers, certified nursing assistants, medical technicians, patient transporters and other hospital jobs are in high demand, she said. Pollack added that the health care field added more than 750,000 jobs last year, which is a “huge number” and about three times pre-pandemic growth.

The epidemic has also created a “FOMO economy”, leading to a surge in travel spending, so Pollack added that there has been an increase in demand for jobs in restaurants and other lodging industries.

“And these jobs can’t be automated,” she said, perhaps insulating those workers from the downsizing in staffing that the company’s AI experiments may result in.

Data shows ‘pretty hot 2024’

Since the U.S. economy reopened in 2022, the job market has generally cooled from its torrid pace.

The Federal Reserve will raise interest rates to their highest level in two decades in an effort to put the brakes on the economy and rein in inflation. It’s unclear when they will lower borrowing costs.

However, the labor market Pollack said the company remains strong and resilient by many metrics and may be strengthening.

“I think a lot of the data shows that 2024 is going to be very hot,” Pollack said. “The slowdown we saw in 2023 is not continuing. Things are either stabilizing or getting better.”

Certain favorable factors appear to be pushing the labor market forward. On the one hand, the “much-anticipated recession” has not materialized, and companies that took a wait-and-see approach to hiring and business investment are now more confident about growing again, Pollack said.

In addition, she said, 2024 is the beginning of “peak retirement years.” Between now and 2030, the largest group of baby boomers is expected to be 65 years old.

That means companies will have to recruit a slew of next-generation talent to replace those who leave, Pollack said.

However, risks remain in the short term.