Churn, baby, churn: The labor market won’t be healthy until people feel like they can quit their jobs

May 7, 2013

America needs more quitters.

i-wont-quit

Or the job market does, anyway. That’s the lesson to draw from the latest Labor Department report, which shows the soft underbelly of the U.S. jobs picture. The unemployment rate may be falling and the number of jobs rising. But there isn’t enough “churn” going on, a hallmark of a healthy job market, in which people freely move between positions.

Let’s back up a minute. On the first Friday of every month, the world holds its breath at 8:30 a.m. to await the jobs report, telling how many jobs were created in the previous month, what the unemployment rate was, and what happened to wages. But those numbers are a blunt picture of the labor market. Tuesday morning, the Labor Department released the Job Openings and Labor Turnover Survey, or JOLTS, for March. It is the favorite data series of labor market wonks everywhere. It parses the details of how many people quit their jobs, how many were laid off or fired, and how many openings employers are looking to fill.

The more standard job numbers point to solid economic improvement over the last year: In the 12 months ending in March, the unemployment rate fell from 8.2 percent to 7.6 percent, and added an average of 168,000 jobs a month. The JOLTS numbers point to something less sunny.

The number of layoffs and discharges has been stable at a low level over the last year, actually below the rate before the recession began. Companies aren’t slashing jobs at a particularly fast pace, which is good news. (Only 1.3 percent of workers were fired in March, which was the same as in March 2012, and the same as in March 2007—in other words, that’s a pretty normal rate of discharges even in a healthy economy.)

But the bad news is that while companies aren’t slashing jobs, the job market is such that workers aren’t comfortable quitting. In March 2007, 2.2 percent of workers voluntarily left their jobs, most of them presumably to take a job elsewhere (that count would also include those who quit to retire, or go back to school, or for other reasons). In March 2013, that was 1.6 percent—unchanged from a year ago and only barely up from the 1.4 percent level of the darkest days of the recession in March 2009).


The proportion of workers who quit their jobs in March remained far below its level in healthier economic times.

The trend holds up across sectors. Different industries have different quit rates, ranging from low (Government, 0.6 percent) to high (accommodation and food services, 3.5 percent). But in none of these sectors has the rate of people quitting gotten back up to its 2007 levels.

What that means is people have no sense that if there is something wrong at their job—a terrible boss, or low pay, or few advancement opportunities—that they can risk quitting with confidence they will find something new. Yes, the burden of the weak economy has fallen most heavily on those who are unemployed. But having a quit rate far below normal levels for five years and counting adds up to millions of Americans who would like to be in a different job but aren’t.

The flip side of that quits numbers is the job openings level.  And that too shows no real progress over the last year. The JOLTS report shows 3.844 million job openings in March, barely changed from 3.848 million in March 2012. That means that the workers who aren’t quitting but might like to are judging the market correctly: Companies are not looking to hire more people and finding insufficient supply of workers for the jobs. Rather, everyone is frozen in place, employers content with the staffing levels they have and workers not quitting because they don’t see other employment opportunities elsewhere.

It is a job market frozen in place. We’ll know the labor market is back when there is finally some serious churn.

 

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Dylan Matthews · May 7, 2013