(Bloomberg) -- A main feature of the 2024 labor market is that fewer people are quitting their jobs. A lesser-known one is that fewer are getting promoted.

That leaves little room for new workers to break through, as the ranks of employees above them stay in place. And it makes it more difficult for young graduates to get their foot in the door.

“A rising tide lifts all boats, but a falling tide leaves the most entry-level folks high and dry,” said Aaron Terrazas, chief economist at Glassdoor.

Data from payroll firm ADP Research Institute showed the annual rate of promotion into management fell for virtually all working adults last year; in 2023, just 2.1% of Gen Z workers — the oldest of which are now 27 — got promotions, down from a high of 2.5% in 2021. Among millennials, the rate dropped nearly a full percentage point last year.

“There’s less hiring going on, there’s less new team formation happening, and so there is less need for new managers,” said Ben Hanowell, director of people analytics research at ADP and author of the report. “Employers are simply less desperate for workers than they were when there was a huge labor supply crunch.”

The promotion slowdown has continued into 2024, according to research from workforce analytics firm Live Data Technologies for Bloomberg News. Among 68 million white-collar professionals, just 1.3% were promoted in the first three months of the year, the lowest rate for any first quarter in data going back five years.

Even though the rate of promotions isn’t low by historical standards, the speed of the slowdown over the past few years has made the change more painful for workers who saw their colleagues climb the ladder so quickly before them. In 2021 and 2022, job-title inflation was rampant as employers leveraged descriptions to entice experienced workers.

“They sometimes elevated folks a little bit beyond their skill set, or folks took jobs that were at the frontier of their skill set,” Terrazas said. The current environment “is a little bit of a letdown from that kind of aggressive hiring two years ago.”

That was evident in the government’s latest employment report. While the 272,000 advance in nonfarm payrolls last month beat all estimates, it’s still a notable slowdown from the average 604,000 monthly rate in 2021. The report showed a decline in employment for workers age 20 to 24.

As the labor market has softened, the balance of power has shifted back to employers, who are under less pressure to hand out promotions in order to hold onto workers. Even though layoffs remain historically low, employees aren’t as confident in their ability to secure a new job — the number of workers who voluntarily quit in April hovered near the lowest level in three years, according to the latest Labor Department data.

Companies have also slowed the rate of promotions in order to control costs. Top executives are talking about “operational efficiency” on earnings calls at a record rate, according to a February report from Morgan Stanley. Firms like United Parcel Service Inc., Citigroup Inc., Alphabet Inc. and Meta Platforms Inc. have all touted efforts to simplify operations by removing layers of management.

The pullback comes with risks for companies as well; those that forgo hiring and delay promotions for top performers could demoralize their strongest contributors — and, in some cases, lose them to competitors. 

“If you don’t promote somebody, there’s a much higher chance that they’ll leave and you’ll have lost some talent that you might want to use later on,” said David Deming, an economics professor at the Harvard Kennedy School. “It’s a savings for the bottom line in the short run, but it’s a risk in the long run that you’ve under-invested in your business.”

The growing gridlock in the labor force means young workers are less optimistic about finding a new position or moving up, and employee confidence among entry-level staff is near the lowest level in Glassdoor data back to 2016.

Demisha Jennings, a career coach and corporate trainer based in Chicago, has seen the shift firsthand among her clients. While promotions a few years ago came easily for some based simply on how long they were in their roles, workers nowadays have to carefully document their impact. “It’s a lot harder, you really have to fight for it now,” she said.

Delays in a career can be meaningful; a first job might serve as a benchmark for future positions and pay. While the negative long-term impacts of entering the workforce in a weak economy are well-established, today’s labor market is still strong by most measures, and nowhere near the one that the class of 2008 experienced.

The job hunt has been a struggle for 22-year-old Preston Ford, who graduated in December from Middle Tennessee State University with a bachelor’s degree in geospatial analysis. He’s been applying since January but hasn’t had any offers yet, so he decided to extend an internship that was set to end in May.

“Full-time positions are definitely a lot more difficult to find for our class, and I’m sure the class of 2024 is going to start to witness this as well,” said Ford. “It’s definitely locked up a little bit.”

--With assistance from Alex Tanzi and Cécile Daurat.

(Adds details from the May jobs report in the ninth paragraph)

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