Incentives for workers to change jobs are diminishing

With the upheaval caused by the coronavirus pandemic, opportunities have arisen as changes in the labor market have provided workers with unprecedented opportunities for mobility and the opportunity to increase pay levels.

In what became known as the “Great Retirement,” record numbers of employees quit their jobs and left in search of better opportunities as companies were unable to hire workers fast enough to fill vacancies created by the pandemic. In March 2022, a record 4.5 million people left their jobs for greener pastures.

But that is changing.

The level of job turnover, as measured by the Bureau of Labor Statistics, has shrunk by nearly a third since its peak in early 2022, when the number of job openings nearly halved.

Certain metrics help tell this story even more. Over the same period, the gap in average annual salary increases for those who stay and those who leave has nearly collapsed, falling from a peak of 8.4 percentage points in April 2022 to 1.9 percentage points in January, the lowest level since payroll firm ADP began tracking the data in November 2020.

You can call this the big stay, or just a byproduct of a labor market with fewer hires and fewer layoffs, but it’s an important trend for workers.

“The labor market is very stable, with very few hirings and very few layoffs,” said Nella Richardson, chief economist at ADP. “This is the result of the pandemic coming together in full force.”

Labor shortages and deep skills gaps came as the economy was recovering from the deep downturn seen in the early days of the coronavirus pandemic. Workers and employers were adapting to the new world of hybrid work, and companies were looking for new employees.

At the peak of mass resignations, there were more than two job openings for every worker classified by the BLS as unemployed. But the pendulum has swung back and there are now more workers available than jobs.

However, the number of layoffs remains low. Just 206,000 new jobless claims were filed last week, compared to the long-term average of 219,000, roughly in line with historical norms for a healthy labor market. Although employment has slowed significantly, the unemployment rate is only 4.3%.

“If you could parachute into this labor market at any time in the United States, you would be pretty much satisfied with what you found there,” Richardson said. “The action is in the detailed data.”

For example, salary trends are industry-specific.

According to ADP, in the leisure and hospitality industry, where turnover is high, salary increases favor those who leave their jobs, with a 2.5% gap in favor of those who leave their jobs. However, the construction industry, which is struggling to supply labor due to the U.S. crackdown on illegal immigration, has a 6.6 point advantage for job seekers.

Indeed, incentives for job movers remain strong, with annual salary growth averaging 6.4% in January, well ahead of 4.5% for stayers, according to ADP data. However, that gap is narrowing and may narrow further due to current labor market trends.

This trend comes with a new swarm of workers combing through job ads.

According to Indeed Hiring Lab, searches were up 31% in January compared to December, but there was little change in job postings.

“The reality facing job seekers in 2026 is fewer jobs per unemployed person and longer hiring timelines,” Indeed experts Laura Ulrich and Sneha Puri write. “While job openings continue to increase in some sectors, the macro environment remains stagnant with low employment and low employment in 2025.”

Mr Richardson said he was concerned about the “lack of dynamism in the labor market”, as despite low unemployment, most of the jobs are in the health care industry and turnover is declining.

“The fact that there are fewer jobs and fewer jobs is actually not a very good situation. Turnover is important for increasing productivity,” she says. “We want the most talented people to go where their talent is best rewarded. And the fact that we’re in this really stable period means that talent isn’t being repositioned to be used to its full potential.”