The Great Pause: Americans Hit the Brakes on Job Switching as the Labor Market Chills

In the bustling landscape of the American workforce, the last couple of years have resembled a game of musical chairs. Tens of millions of Americans hopped from job to job, enticed by significant pay raises and a plethora of opportunities—a phenomenon that economists cleverly dubbed the “Great Resignation.” However, this frenetic pace of job switching seems to be easing, as revealed by a recent report from the Bank of America Institute based on internal data.

As of May, the number of workers moving from one job to another has settled at around 3%, a noticeable decline from mid-2022 when it peaked near 3.75%. It appears that the feverish job-hopping has cooled down. This data arrives at an interesting time when even wealthy Americans, who are typically seen as financially secure, are feeling the pinch and growing anxious about making ends meet.

The Great Resignation was fueled by an unprecedented number of workers resigning in 2021 and 2022. With an incredibly tight labor market, many individuals seized the opportunity to seek better wages, working conditions, and hours. And why not? Switching jobs proved to be a lucrative endeavor. Workers who made the leap in July 2022 received an 8.5% annual pay raise, compared to a 6.7% increase for those who stayed put, according to the Federal Reserve Bank of Atlanta. However, the golden days of job-hopping seem to be waning as the pay bumps for job switchers have started to shrink.

At the peak of the Great Resignation, the median pay raise for job hoppers soared above 20%, according to Bank of America. Fast forward to May 2024, and that figure has sharply dropped to about 10%. This decline signals a shift in the labor market dynamics, especially for middle- and higher-income job changers who now find themselves with less bargaining power than before.

Interestingly, lower-income Americans are still seeing robust median pay raises when they switch jobs. This is a testament to the still-present opportunities for those at the lower end of the income spectrum. However, small businesses are grappling with a new challenge: ballooning rents. Amidst these changes, recruiters continue their diligent search for suitable candidates, as evidenced by bustling job fairs across the country, such as the one held at the Las Vegas Convention Center in April 2022.

The decline in job switchers is one of the latest indicators that the labor market might be losing some of its steam, influenced by higher interest rates and persistent inflation. As Bank of America economists noted, the pay raises for job changes have dipped below 2019 levels, suggesting that the balance of bargaining power may have shifted somewhat away from workers.

In this evolving landscape, both employers and employees find themselves navigating new challenges and opportunities. While the era of substantial pay raises for job switchers may be fading, the labor market remains a dynamic arena where adaptation and resilience are key. Whether this slowdown continues or another shift occurs, the American workforce will undoubtedly keep us all on our toes.