Friday’s jobs report was a disappointment, but here’s one sign the labor market may be improving: More people are quitting their jobs.
More than two million Americans quit their jobs in February, the Labor Department said yesterday. That’s the most since November 2008.
Strategists at ConvergEx Group pointed out in a note to clients that quits are a measure of economic confidence — people don’t tend to quit their jobs in tough labor markets because they’re worried they won’t be able to find a new one. During the downturn, monthly quits plunged to a record low of 1.6 million in September 2009, down from more than three million per month before the recession began. The fact that they’re rising again suggests that workers may finally be seeing signs that the job market is improving.
Quits matter for another reason, too: They’re a component of “churn,” the regular comings and goings that are a critical element of any healthy job market. When people leave jobs in search of higher pay and new opportunities, they open up opportunities for others. When they stop quitting, those opportunities dry up.
“For workers who are unemployed, if there’s less churning of jobs, it’s harder to get on the merry-go-round,” University of Chicago economist Steven Davis said in a Wall Street Journal article in February.
Churn is a big deal. A new paper by Edward Lazear of Stanford and James Spletzer of the Bureau of Labor Statistics finds that during the recent recession, 80% of the drop in hiring was due to low levels of churn, rather than reduced job creation. The authors estimate reduced churn shaved two-fifths of a percentage point off GDP for the duration of the recession.
Quitting, of course, makes up just one half of churn. Companies also have to be willing to fill those open positions. That’s happening too, but slowly. Companies hired a seasonally adjusted 4.4 million workers in February, up 3.4% from January and 7.2% from a year earlier, according to the Department of Labor. (Yesterday’s hiring numbers are a gross figure, unlike Friday’s payroll figures, which report a net number of hires minus separations.) Job openings are rising faster than actual hires, which could suggest companies are dragging their feet on filling open positions.
The uptick in quits could yet turn out to be short-lived, especially if the March slowdown in hiring erodes worker’s confidence in the job market. Still, if the trend holds, increased churn could help smooth the waters for the economy in the months ahead.
