Purpose: The purpose of this paper is to examine career engagement and perceived employability during the school-to-work transition. We studied within-person changes in career engagement and perceived employability in the transition from higher education to the labor market. We investigated their dynamic reciprocal relationship to unravel whether career engagement or perceived employability is the leading indicator in the relationship in view of providing adequate support for students during the school-to-work transition. Design/methodology/approach: We conducted latent change score (LCS) analyses on a three-wave sample of 701 graduates in Flanders (Belgium). We collected data in July (right before graduation), November and May. LCS is a novel method allowing to simultaneously test change and reciprocal relationships. Findings: Our findings demonstrated how both career engagement and perceived employability changed (within-person) non-linearly during the school-to-work transition. As for their relationship, we found that perceived employability is the driving force in the relationship. Perceived employability fueled subsequent positive changes in career engagement, whereas career engagement did not lead to subsequent changes in perceived employability. Originality/value: Our study connects the career development and the graduate employability literature, and examines the school-to-work transition from preparation for the labor market to ten months after graduation. We also make an important methodological contribution, demonstrating the added value of LCS for studying employability in higher education. Our findings provide insights in how higher education institutions may support students in the school-to-work transition.