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Did your manager know you wanted the promotion? If yes, ask what you need to do to be considered for promotion in the future. Get specific steps in writing. If you can get actionable feedback, it might be good to stay. If you get the runaround, you should probably look for a new gig.
This just happened to me recently. Got told I am doing an amazing job with no critical feedback yet they keep hiring in more senior staff leaving promotion opportunities scarce
In a way. I raised the idea of hiring a jr. person so I could get out of the soup and back to higher level work and mentoring. Instead, after more than a dozen years as a PM (not all at current company), apparently I'm said jr. person.
OP, definitely talk to your manager and directly say something like, “I would like to be considered for promotion and am disappointed a new hire was brought in for the senior position. What should I do to be considered for future opportunities?”
I used to manage a department. Believe me, it is good to be as communicative as possible with your boss. Your manager might have been looking for a certain skillset that had to be hired from outside, or might not think you are ready for promotion for some reason. But in order to get what you want, you have to find out what you need to do.
And let me know how it goes!