The number of American workers switching jobs in one year has reached an all-time high, thanks to a competitive hiring environment created by the lowest unemployment levels in 10 years. According to the Workplace Vitality Report released last week by payroll company ADP, 26.5% of workers in the private sector changed jobs in the 12 months ending in the first quarter of this year. This is the highest the rate has been since ADP first began tracking in the fourth quarter of 2014.
Almost half of all workers in the leisure and hospitality industries and one-third of workers in the professional and business services changed jobs in the past year. Those full-time workers who reported changing jobs also saw an average annual earnings gain of 5.2%, compared to 4.3% for those who stayed put.
The smaller pool of unemployed workers means companies are compelled to compete with other firms for their employees. The Labor Department reported earlier this month that unemployment dropped to 4.4%, the lowest it’s been since May 2007. In 2009, in the throes of the Great Recession, it reached as high as 10%. The economy added 211,000 jobs last month and 940,000 since the beginning of the year.
The Labor Department also reported that underemployment – including part-timers and those with varying lengths of employment – was at its lowest since 2007. The U-6 rate, the largest measure of underemployment, was at 8.6%, down from 17% in 2010.
“It’s a very strong report,” Michael Arone, chief investment strategist at State Street Global Advisors, told CNN at the time of the Labor Department’s numbers release. “We’re nearing full employment in the U.S. economy.”
And it’s creating a hiring environment that favors employees, who now have more leverage to change jobs as companies compete for them. “As the labor market tightens, employees have more power,” said Ahu Yildirmaz, co-head of ADP’s research institute, which delved further into job movement in recent surveys.
In another ADP survey entitled “Evolution of Work 2.0: The Me vs. We Mindset,” the payroll company found that, with all else being equal, a 13% increase in pay would be enough for workers to take another job. In fact, almost half (47%) of employees at medium-sized companies would leave their jobs for positions that paid the same as or even less than their current salary.
Other reasons employees leave, as reported by research firm Work Institute which studied over 34,000 exit interviews, are career development (22%), work-life balance (12%), management behavior (11%), compensation and benefits (9%) and wellbeing (9%).
The Evolution of Work 2.0 survey also found that 63% of workers are open to changing jobs, made up of 46% who are casually looking and 17% actively looking. At the same time, those employers surveyed say just 49% of their employees would consider leaving their jobs.
“There’s a disconnect,” said Yildirmaz. “Employers really have to think about how to attract, how to engage and how to retain employees.”
Retention continues to be a challenge for employers; ADP reports that 47% of employees have left positions that did not meet their expectations and the promises laid out at hiring.
“ADP’s economic reports on employment and wages show if employers can’t meet the needs of their employees, they can easily look for new jobs elsewhere,” said Jan Siegmund, CFO of ADP. “In addition, employers face a perfect storm of sorts when it comes to keeping top talent. While they focus on efforts to be an employer of choice, face paying higher wages and more, their employees can use technologies that make it easy to essentially browse for new job opportunities.”