“Both separations and hires have been on the decline recently, suggesting workers are less able to find new and better opportunities,” said Adam Schickling, a senior Vanguard economist. “Separations have outpaced hires in the past 10 months. This could be a sign that employers are not backfilling positions, possibly because of perceived economic weakness or uncertainty.”

December 2023 data from 401(k) retirement plans administered by Vanguard point to a continuing decline in hirings and separations activity:

• The new hires rate stood at 1.9%, down 0.2 percentage points from October 2023 and 0.8 percentage points from December 2022. (The new hires rate is calculated as a percentage of the workforce.)

• The separations rate was 2.2%, a decline of 0.1 percentage point from October 2023 and 0.3 percentage points from a year earlier. (Separations include employees who have left their employer voluntarily or involuntarily, but voluntary separations are generally far more prevalent.)

"Although there have been some recent pockets of labor market strength, including a strong December jobs report,” Schickling said, “analyzing multiple signals is key for evaluating the labor market’s potential impact on the overall economy.” 

Data from the Job Openings and Labor Turnover Survey (JOLTS), published by the U.S. Bureau of Labor Statistics, are largely consistent with recent trends in Vanguard data. Both are showing a moderation in hirings and separations across the economy, although the downward trend is a little less pronounced in the JOLTS data. And while the JOLTS data are still showing hires outpacing separations whereas the Vanguard data have shown separations now exceeding hires, the trends are converging.

The JOLTS data’s broader representation in terms of industry and firm size may be responsible for some of the modest differences.

“The government and health care sectors together explain roughly half of all new job growth in 2023,” said David Pakula, a Vanguard investment strategist. “These industries are underrepresented in the Vanguard 401(k) population, so it’s understandable that the Vanguard 401(k) series presents a more cautious assessment of the labor market than the JOLTS data.” 

“While the U.S. economy and labor market proved much more resilient to higher interest rates in 2023 than many were expecting, we highlight in our 2024 outlook that the offsets fueling this resilience, such as pandemic-boosted household and corporate balance sheets, are fading,” Schickling said. “Our outlook is for a mild recession in 2024, resulting in modestly higher unemployment in order to bring inflation sustainably back to the Federal Reserve’s 2% inflation target. The labor market trends in these data provide additional support for that view.”

Vanguard’s proprietary hires and separation data are rooted in real-world enrollments and participant counts in 401(k) retirement plans.

It should be noted that Vanguard hires and separations data do not capture the whole U.S. economy, since only roughly half of workers—a group disproportionately composed of higher-income workers—have access to employer-sponsored retirement plans. Moreover, employers that offer 401(k) plans tend to be larger, more mature, and concentrated in certain industries. 

• Our investment and economic outlook, January 2024 (article, issued January 2024)
• Vanguard’s economic and market outlook for 2024 (hub, issued December 2023)
• The Vanguard Retirement Outlook: A national perspective on retirement readiness (31-page PDF, issued October 2023)
• Generational changes in 401(k) behaviors (11-page PDF, issued April 2023)