The financial incentive to switch jobs has diminished significantly, according to new data from payroll processor ADP, with the gap between pay increases for job-hoppers and those who remain with their current employer narrowing to the smallest margin since November 2020.
ADP’s January report, shared with Fortune, revealed that year-over-year pay growth for workers who changed jobs slowed to 6.4%, down from 6.6% in December. Simultaneously, pay growth for employees who stayed with their companies held steady at 4.5%, a rate maintained for much of the past year. The difference between the two groups now stands at just 1.9 percentage points.
The trend represents a shift from the labor market dynamics of recent years, where frequent job changes were often rewarded with substantial salary bumps, particularly during the tight labor market spurred by the COVID-19 pandemic. Now, the data suggests that significant pay gains through job hopping are largely confined to specific sectors where demand for skilled labor continues to outstrip supply.
Construction, natural resources, and mining industries saw the largest advantage for job-hoppers, with pay growth of 6.6% and 5.6% respectively, compared to their staying counterparts. Financial activities and manufacturing too offered a boost to those switching employers, with gains of approximately 3% over those who remained in their roles. But, gains were minimal in service roles, education, healthcare, trade, transportation, and utilities, with increases of only 0.6% and 1.6% respectively for those who moved.
Interestingly, the ADP data indicates that remaining with a single employer can be more financially beneficial in certain sectors. Workers in leisure and hospitality, and information technology, actually experienced greater salary growth while staying place, with wage increases differing by -2.5% and -0.6% respectively compared to those who switched jobs.
The findings align with a broader economic narrative of slowing hiring, as highlighted in January’s jobs report, which added 130,000 roles, exceeding expectations. However, economists like RSM Chief Economist Joe Brusuelas suggest a “slow-hire, slow-fire” approach is becoming the base case. Brusuelas recently wrote that factors such as changing demographics, tighter immigration policies, the end of labor hoarding, and improvements in productivity are contributing to the slowdown, and that these factors are unlikely to change in the near term.
“While GDP provides strong insight into production, construction and investment, it does not always tell us how we live now,” Brusuelas added. “Slower job growth makes it more difficult to find a similar job at higher wages and adds to the particularly real affordability crisis that many households face.”
Beyond wage trends, the ADP report, led by chief economist Dr. Nela Richardson, also points to a decrease in working hours. Employees are, on average, working one hour less per week than they were before the pandemic. While January saw a modest year-over-year increase in hours worked, levels remain near a seven-year low, averaging 33.6 hours per week compared to 34.7 hours in January 2023.
This shift is partially attributed to a rise in part-time work, with approximately 45% of U.S. Workers now working less than a 35-hour week, a 6 percentage point increase since 2019. The aging U.S. Population is also a contributing factor, with the median age of workers increasing from 40.5 in 2004 to 41.7 in 2024, according to the Bureau of Labor Statistics. Projections from the Population Reference Bureau indicate that the number of Americans aged 65 and older will increase from 58 million in 2022 to 82 million by 2050, representing a 42% increase.