The Vanguard data can be particularly insightful given the challenges facing government labor data collection since the COVID-19 pandemic. One major challenge, according to Adam Schickling, a Vanguard senior economist who studies the labor market, is the frequent and substantial revisions to government data. This issue has lately been exacerbated by the U.S. government shutdown, which disrupts the collection of key data that the Fed rely on in setting monetary policy.
Hiring has cooled, particularly for younger workers
After a rapid rise in employment growth during the post-pandemic period, hiring activity has cooled significantly, according to data from Vanguard-administered 401(k) plans. The rate of job growth has slowed from a peak of 0.36% in August 2022 to 0.09% in September 2025. Our job growth measure has been below 0.10% in seven of first nine months of 2025; the last time it remained below 0.10% for an extended period was in 2009, during the recession that followed the global financial crisis.
“Recent large revisions to nonfarm payroll releases, driven by low survey response rates and methodological limitations, have raised concerns about the reliability of headline employment figures,” said Nicky Zhang, a Vanguard investment strategy analyst.[1] “In contrast, Vanguard’s net hires rate is derived from administrative data, which are not subject to such revisions and offer a stable and timely view of labor market dynamics.”
Hiring data from Vanguard and the government show a continuing labor market slowdown
Growth rate | Created with Datawrapper
Note: The two vertical bars indicate economic recessions, as identified by the National Bureau of Economic Research. The Vanguard employment growth rate represents monthly net hiring activity calculated as hires minus separations, divided by the total employment level from the previous month. The U.S. employment growth rate is the three-month moving average of the month-over-month change in nonfarm payroll employment. Both series are seasonally adjusted using the X-13ARIMA method. The three-month average helps smooth short-term fluctuations. We excluded the effects of temporary, pandemic-related layoffs in 2020 and used the final revised nonfarm payroll employment data for the U.S. employment growth series.
Sources: U.S. Bureau of Labor Statistics and Vanguard.
The slowdown in employment growth has been consistent across age groups, but is particularly notable among younger workers. For workers ages 21–25, the rate of job growth is currently 2.1%, down from a 2022 peak of 5.7%. The rates of job growth for the 26–40 and 41–55 age groups have also fallen by over half from their post-pandemic highs.
“Younger workers have historically accounted for a large share of employment growth, so they are particularly exposed to the pullback in firms’ hiring activity,” Schickling said. “But since hire rates for older workers have followed a similar trajectory, we hesitate to ascribe younger workers’ recent struggles to longer-term structural forces, like AI-enabled automation of entry-level jobs.”
Employment growth has slowed recently across age groups, with younger workers seeing the sharpest decline
Net hires growth rate (3-month moving average) | Created with Datawrapper
Notes: The two vertical bars indicate economic recessions, as identified by the National Bureau of Economic Research. For each age group, the Vanguard monthly employment growth rate is calculated as the difference between hires and separations, divided by the employment base of that age group in the prior month. The series is seasonally adjusted using the X-13ARIMA method, and we report a three-month moving average to smooth short-term fluctuations. As of September 2025, the sample included approximately 215,000 employees ages 21–25, 1.5 million employees ages 26–40, and 1.4 million employees ages 41–55.
Source: Vanguard.
Hourly workers give early signals of income changes
With new job growth at historically low levels, firms may soon use other levers to adjust their labor utilization. Businesses with hourly workers have an extra degree of flexibility: They can scale hours up or down without hiring or laying off employees. Since hourly workers represent about 55% of the U.S. workforce—and a similar share of Vanguard’s 401(k) population—hours adjustments can greatly affect both production and household income.[2]
“The hours margin has historically been a key part of firms’ adjustment to short-run market conditions,” said Fiona Greig, Vanguard global head of investor research and policy. “This in turn exposes hourly workers’ incomes to the fluctuations of the business cycle. In the months ahead, we’ll be looking to hourly workers’ paychecks as a leading indicator of labor market conditions, household finances, and consumer spending.”
As of September 2025, income growth for hourly workers (+4.3%) and salaried workers (+3.6%) still exceeded inflation.[3] With the hire rate dropping and hourly income growth remaining above 4%, firms for now seem to be managing costs through headcount rather than hours and wages.
Hourly and salaried workers both experienced a significant increase in income growth during the pandemic period, followed by a gradual decline back toward the 3%–4% range. But hourly workers show more volatility and have consistently been the first to move with the business cycle—declining at the onset of the global financial crisis in late 2008, falling sharply with COVID uncertainty in early 2020, rising sharply in early 2021, and peaking in early 2022.
Vanguard’s income growth series, computed from data on employee contributions to Vanguard 401(k) plans, shows that hourly workers’ income can serve as a gauge of consumer resilience and underlying economic conditions. We analyze median year-over-year income growth for employees who have been with their firm for at least one year. “Because we track total income rather than average hourly earnings, our series reflects both short-run changes in hours and the longer-run evolution of wage rates and base salaries,” said Vanguard investment strategy analyst Aaron Goodman.
Hourly workers’ income is more responsive to the business cycle
Year-on-year percentage growth (3-month moving average) | Created with Datawrapper
Note: The two vertical bars indicate economic recessions, as identified by the National Bureau of Economic Research. The Vanguard income growth series considers employees who made 401(k) contributions in all 12 months of the preceding calendar year. For each employee contribution, we infer the paycheck amount as the contribution amount divided by the contribution rate. For each employee and each month, we compute total income divided by the number of paychecks. We then compute the year-over-year percentage change in income per paycheck (current month income relative to income 12 months ago) for each employee and take the median across employees. Finally, we report a three-month moving average of the monthly median growth rate. We exclude monthly observations in which the employee earns less than $200 per paycheck or in which the smallest paycheck is less than 10% of the largest paycheck. Employees are classified as hourly if at least 45% of their paychecks in the preceding calendar year changed by at least $1 relative to the lagged paycheck value. The 45% cutoff is benchmarked against external payroll processing data from Earnings Instability (Ganong et al., 2024). There are approximately 1.5 million 401(k) participants in the Vanguard sample in 2025.
Source: Vanguard.
What we (and the Fed) will be watching
Although hiring momentum has slowed, Vanguard data illustrate persistent labor market resilience—wage growth remains solid and employment levels are stable. Going forward, the income trajectory of hourly workers will be a key indicator for assessing shifts in economic conditions and consumer behavior.
Contributors:
Fiona Greig, Ph.D., Vanguard Global Head of Investor Research and Policy
Adam Schickling, CFA, Vanguard U.S. Senior Economist
Aaron Goodman, Ph.D., Vanguard Investment Strategy Analyst
Nicky Zhang, Vanguard Investment Strategy Analyst
[1] Nonfarm payroll data is released on the first Friday of each month by the U.S. Bureau of Labor Statistics and is revised over the following two months as additional survey responses are received. A more comprehensive revision occurs each February, in which employment figures are retroactively adjusted based on unemployment insurance tax records from the Quarterly Census of Employment and Wages.
[2] Source for hourly workers representing 55% of the U.S. workforce: U.S. Bureau of Labor Statistics, available at bls.gov/opub/reports/minimum-wage/2023/.
[3] The year-over-year change in the Consumer Price Index for All Urban Consumers (CPIAUCSL) was 2.9% in August 2025.
Notes:
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