People Leaving Their Jobs Are Making More Money

Americans who changed jobs saw their pay increase for the first time in a year as private employers added more jobs, according to the ADP National Employment Report released Wednesday—a sign that the labor market remains strong in the world’s largest economy.

Companies added 140,000 new employees in February, up from January’s revised numbers of 111,000. Meanwhile, pay for workers who switched jobs increased by 7.6 percent, a 0.4 percent increase from the previous month and the first jump for about 12 months. For workers who stayed at their jobs, pay gains slowed to 5.1 percent, the lowest increase since August 2021, ADP data showed.

In February, employees who remained at their jobs saw a median pay of almost $59,000 per year.

In recent months, Americans, who are less optimistic about their financial conditions, have been concerned about their jobs. Economists suggest that while the labor market may slow, mass layoffs look unlikely over the coming year.

“Job gains remain solid. Pay gains are trending lower but are still above inflation,” Nela Richardson, ADP’s chief economist, said in a statement. “In short, the labor market is dynamic, but doesn’t tip the scales in terms of a Fed rate decision this year.”

The Federal Reserve pays close attention to pay increases and the impact they might have on inflation, which has been elevated.

In the summer of 2022, the Consumer Price Index, used to measure inflation, soared to four-decade highs, prompting the central bank to institute aggressive rate hikes to slow price increases.

Inflation has slowed, but it remains higher than the Fed’s 2 percent target. Higher interest rates have pushed up borrowing costs across the economy, making loans expensive for the purchase of many things, including homes.

The Fed’s current rate sits in the 5.25 to 5.5 percent range, the highest it has been in more than 20 years.

Wednesday, Jerome Powell, the chair of the Federal Reserve, suggested policymakers are likely done raising rates and may cut borrowing costs at some point this year, as long as inflation progresses to their target.

“We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Powell said in prepared remarks set to be delivered to Congress Wednesday. “The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

Economists expect the first reduction of borrowing costs by the summer.

While monetary policy has been tight and has slowed business investment, employers have steadily kept recruiting—buoying the economy as a result. The ADP data shows job gains across the board, with some exceptions. Goods-producing sectors saw a 30,000 overall increase in jobs, with declines reported in natural resources and mining. The service industry added 110,000 workers, though the information sector lost 2,000 jobs.

In his statement to Congress, Powell lauded the performance of the jobs market: “The strong labor market over the past two years has also helped narrow long-standing disparities in employment and earnings across demographic groups.”