Job hoppers are pumping the brakes as the U.S. labor market downshifts

The latest analysis from the Bank of America Institute reveals that a growing number of Americans are opting to stay in their current jobs rather than seeking new opportunities in the labor market. This shift comes as the job change rate, defined as the percentage of Bank of America customers who have changed employers, has slightly increased this year but remains lower compared to the peak experienced during the “Great Resignation” period of the pandemic.

During the Great Resignation, over 20 million workers left their jobs in search of better work opportunities and work-life balance. However, the current data from Bank of America shows a downward trend in job changes among its customers, indicating that workers are choosing to stay put as hiring activity by employers has slowed down.

Economist Taylor Bowley from the Bank of America Institute suggests that factors such as tariffs and business uncertainty may be contributing to the decline in job switching rates. With fewer job openings and increased uncertainty in the market, employees are choosing stability over risk.

The recent slowdown in the labor market is evident in the sharp decrease in average monthly payroll gains from May to July, as reported by the Labor Department. This, coupled with stagnant job growth, has led to a sense of nervousness among workers about the future of the labor market.

As job hopping decreases, the median pay raise for workers who switch employers has also declined. Data from the Bank of America Institute shows that the median raise for job switchers was 7% in July, down from 10% in 2019 and 20% in 2022. This trend is reflected in the findings of the ZipRecruiter New Hires Survey, which indicates that fewer new hires are negotiating their starting salaries.

Furthermore, Federal Reserve data reveals that wage growth for job hoppers has equalized with that of job stayers for the first time since 2010, signaling a cooling labor market. The power dynamic between employees and employers has shifted, with employers gaining more leverage as job opportunities become scarce.

The uncertainty surrounding tariffs has also impacted employers’ decisions to make significant business investments, leading to a pause in hiring activity. This deceleration in job changes and pay raises could potentially dampen consumer spending growth in the future, according to Bowley.

In conclusion, the current trends in the labor market point towards a more stable but less dynamic environment for workers. As job opportunities dwindle and uncertainty looms, employees are opting for job security over potential pay raises from switching employers. This shift in behavior reflects the evolving landscape of the labor market and the changing dynamics between workers and employers.