Vanguard’s proprietary data on enrollments in 401(k) retirement plans indicate employers are tapping the brakes on hiring: In July 2023, the hire rate was 2.1%, down from 2.4% in June 2023 and 3.1% in July 2022. This is consistent with recent data from the Job Openings and Labor Turnover Survey (JOLTS) published by the U.S. Bureau of Labor Statistics.¹

“Vanguard’s hiring data track JOLTS remarkably well and offer a fresh perspective on labor market trends based on daily enrollments among roughly 5 million retirement plan participants,” said Vanguard investment analyst David Pakula. “Ahead of next week’s JOLTS release, we are already seeing in our data that hiring is continuing to moderate.” 

The figure below displays both the Vanguard hires rate and the JOLTS hires rate since 2003. (Both rates refer to new hires as a share of existing employees.) Both series show a pronounced drop in hiring during the 2008 global financial crisis and a surge in hires after COVID-19 restrictions were lifted, followed by a gradual return to pre-pandemic levels.

The JOLTS hires rate spiked to 6.1% in May 2020, likely reflecting the surge in rehires of many hourly service workers who were temporarily laid off during the COVID-19 lockdowns. That rate remained elevated through 2021 and has since declined to a low of 3.8% in June 2023.

The Vanguard hires rate based on 401(k) enrollments, which favors workers at larger firms, rose more gradually after the initial COVID lockdowns, peaking at 3.5% in March 2021. It has since declined to a low of 2.1% in July 2023.

“The recent moderation in hiring suggests that businesses have largely filled the employment gaps caused by the pandemic’s disruptions,” said Vanguard economist Adam Schickling. “We may be at an inflection point in the business cycle, where firms become more conscious of labor costs and employed workers become more hesitant to leave their jobs.”  

It should be noted that Vanguard hires data do not capture the whole U.S. economy, since only roughly half of workers—disproportionately 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. Vanguard’s hiring data contribute to an array of private sector sources of labor market data that complement federal surveys.²

Hiring is not uniform across all industries. Here we highlight four diverse sectors that span the spectrum in hiring trends. Over the past decade, Vanguard data show:

• Media, entertainment, and leisure hiring has dropped the most. This sector reflects more discretionary spending and generally exhibits higher labor market churn and greater sensitivity to business cycles. Hiring in this sector has seen the largest proportional slowdown, to 1.3% in July 2023, down 1 percentage point compared with July 2022. Despite continued retail sales growth in July, this slowdown in hiring could potentially be a sign that employers are cautious about increasing headcount.
• Business, professional, and nonprofit services slowed as well. This tends to be a relatively higher wage sector and has been strong post-COVID. Still, the hires rate declined to 2.0% in July 2023, down 0.8 percentage points compared with a year prior, signaling that labor market softening isn’t exclusive to lower-paid sectors.
• Manufacturing’s decline has been less pronounced. This sector, which is likely more sensitive to recent interest rate hikes, has seen some moderation from the elevated pace of hiring back toward pre-pandemic levels. The hires rate was at 1.7% in July 2023, down 0.4 percentage points from the previous year.
• Education and health, by contrast, has ticked up. The hires rate in this sector rose in recent months to 1.6% in July 2023, up 0.1 percentage point relative to July 2022. Health care, in particular, has seen elevated labor demand as elective healthcare spending normalized post-COVID.

“Overall, the slowdown in hiring seems to be concentrated in industries with higher labor market churn, where natural attrition may be a powerful cost-cutting measure for firms,” said Schickling.

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