Here are three other takeaways from Vanguard's latest data:

Hiring holds steady for lower-wage earners.

After hitting a soft patch earlier this year, job growth for lower-wage workers (those earning less than $55,000 annually) has rebounded, supported by stronger hiring and stable layoff rates, data shows. Growth for this group was 0.47% in August, up from 0.23% in February. "Lower-wage workers have seen hiring improve alongside low and stable layoff rates," said Nicky Zhang, a Vanguard investment strategy analyst. "While separations remain low for middle- and higher-income workers, hiring has softened for these groups, resulting in slower job growth."

Layoffs remain within normal bounds.

Recent layoff announcements, primarily in white-collar sectors, have sparked concerns about AI-driven job losses. However, Vanguard research shows layoff activity has normalized to pre-pandemic levels, suggesting no structural shift in labor demand. "Monthly layoffs exceed one million even in tight labor markets," Schickling said. "This is a normal and healthy function of a dynamic labor market."

Income growth remains strongest among lower-income workers.

Beyond hiring and layoffs, Vanguard's 401(k) data indicates that among workers earning less than $55,000 annually, year-over-year income gains averaged 4.7% in the second and third quarters of 2025. Middle-income earners (those earning $55,000–$102,000 annually) saw growth of 3.9% over the same timeframe, while high-income earners (those earning more than $102,000 annually) averaged 3.6%. Gains for those groups have trended slightly downward in recent months, aligning with slower high-income job growth. "Income growth can signal labor market health if firms cut hours before layoffs," said Aaron Goodman, another Vanguard investment strategy analyst. "So far, income gains remain stable, especially among the hourly workers in the bottom half of the income distribution."

These trends — supported by BLS data, according to Vanguard officials — underscore the resilience of the labor market, the company said. Vanguard expects modest unemployment increases and stable wage growth through the end of 2025, with improvement anticipated in 2026 as trade policy uncertainty eases, government employment stabilizes, and productivity-enhancing investments continue to take hold.

Instant Insights /

Labor market remains stable, driven by lower-wage hiring rebound

More From HR Executive

Related Stories

Recommended For You