As fall begins, the US economy also appears to be entering a new stage of labor market dynamics, where job growth remains more resilient than many predicted. One reason we may be seeing this change in the labor market is that wage growth has slowed so significantly that employers previously unable to afford new talent can afford to hire. 

Gusto’s New Hire Pay Index shows that, overall, companies are paying 3.5% less for new hires than they were this time last year. Indeed, the industries where new hire pay has fallen the most (including the Transportation and Insurance sectors) are seeing the fastest job gains – indicating that employers are finding workers at a significant value now, stemming off any further slowdown in the job market.

  • In September, pay among newly hired workers was 3.5% lower than pay for those hired this time last year, led by decreases in the index within Other Professional Services (-18.7%), Transportation (-7.6%), Finance (-5.9%), and Insurance (-5.0%).
  • SMB employment grew by 0.2% in September 2023, half the rate of job growth this time last year. The fastest-growing industries in September were Arts & Entertainment (+2.6%), Transportation (+1.0%), Insurance (+0.9%), and Healthcare & Social Assistance (+0.8%).

Gusto’s New Hires Pay Index

Gusto’s New Hires Pay Index tracks business competition for workers in real-time. It’s the change in wages paid to employees hired this month compared to a year ago. This index rose from -4.2% in August to -3.5% in September 2023, meaning businesses paid new workers 3.5% less than new hires last year, a sign that the easing competition among employers looking for workers has settled down.

Hiring Trends

Across sectors, SMB employment increased by 0.2% in September, compared to a 0.4% increase in September last year. While there was a large drop in hiring over this time, we also saw a 0.2 percentage point fall in the Involuntary Termination rate, as the spike in layoffs seen last year ticked down to historical levels.

The drop in layoffs is a positive sign that companies are no longer actively looking to let go of workers ahead of a possible downturn.

About the data

Gusto pay and hiring trends data is derived using Gusto’s real-time payroll data from over 300,000 small and medium-sized businesses across industries and across the country. New Hires Pay Index calculates the percent change in average annualized pay between workers hired in a given month and those hired one year earlier.

Interested in learning more about these trends? Contact us at [email protected]

Luke Pardue Luke Pardue was an Economist at Gusto, researching how public policies help small businesses and their workers thrive. He received his Ph.D. from the University of Maryland, where he studied the effects of government programs on disadvantaged populations’ housing and labor market outcomes.
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