Strong job market not enough to calm nervous employees

The employment data continue to be encouraging, but that’s not stopping anxious employees from scaling back their retirement contributions.

Total nonfarm payroll employment increased by a healthy 263,000 in September, and the unemployment rate edged down to 3.5%, the Bureau of Labor Statistics reported Friday. One might expect those impressive economic figures to spur the stock market higher, yet the S&P 500 Index fell more than 2% Friday’s trading morning, reflecting fears that additional rate hikes by the Federal Reserve will slow the economy.

That knee-jerk response from traders mirrors the uncertainty felt by American workers, according to the second annual study of workplace financial benefits released recently by Morgan Stanley at Work.

According to the study, 62% of employees have reduced contributions to their savings as a result of the economic impacts related to inflation or concerns about a recession, with nearly a third (31%) reducing contributions to their 401(k) plans and more than a quarter (26%) scaling back on paying off their debts and loans.

Breaking the survey down by generation, Gen Z (74%) and millennials (68%) were reported to be more likely to have made these reductions than their baby boomer counterparts (37%).

“Employees are looking to their employers for the resources and support they need to navigate personal financial challenges — challenges that have a real impact on their professional and personal success, both day to day and long-term,” Krystal Barker Buissereth, head of financial wellness at Morgan Stanley at Work, said in a statement.

She added that especially in the face of today’s high inflation and market uncertainty, “we are seeing that smart and accessible workplace benefits like Financial Wellness can be a lighthouse for employees to find helpful tools, financial education, and professional guidance.”

The study also showed that more employees cited “money-related stress” as a performance inhibitor in the past year. In fact, nearly 3 in 4 employees (71%) said that money-related stress negatively affects their work and personal lives, up 7 percentage points (from 64%) in 2021. Among age groups, millennials (77%) proved to be the most likely to say financial stress is negatively impacting their work and personal lives, up from 69% the previous year.

Not that they want to share that stress with their employer — or were even aware they could. According to the study, nearly half (47%) of employees said they never thought to reach out to their employer for assistance with their personal finances.

And given the chance, the report showed there's little doubt that employees would want to work with an adviser, especially on the topic of retirement. For example, when asked what type of retirement planning would be most beneficial to them, employees identified “access to a financial adviser” as their top choice, at 52%.

“The data makes it clear that employees are struggling to find a balance between long-term savings and immediate needs,” Anthony Bunnell, head of retirement at Morgan Stanley at Work, said in a statement. “One often-overlooked resource that can change the game, especially in today’s environment, is the financial advisor available through your workplace retirement plan — who can help participants reach financial goals.”