Employment Data Confirm Economic Stagnation

Wednesday, 08 May 2013 07:39 AM

By Michael Carr

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Someone with a job will usually only quit if they have a better opportunity somewhere else. Better opportunities include an improvement in working conditions in addition to increased financial compensation. Because most quitters will be confident they can find a better job, the number of people willing to quit their job offers useful insights into the job market.

Strength in the job market should be associated with an increase in the number of those quitting jobs. In a weak market, employees would be more likely to stay in their current job rather than take the chance that they will be able to find a comparable job.

The percentage of job leavers, the formal term for employees quitting a job after choosing to do so, has been moving higher since the 2008 recession began and is now at levels not seen since the mid-1990s. This is a promising sign for the economy, although it doesn’t mean that good jobs are available for anyone willing to work.

The following chart shows job leavers as a percent of all employees.

Carr.jpg

Strength in economic terms is always relative. While the proportion of job leavers is moving up, that does not mean people are moving into higher-paying jobs. It could mean that employees have adapted to a new normal with low wages and more part-time positions.

For example, rather than obtaining higher wages, leavers might be moving from one part-time retail position to another low-paying retail job because the hours are more convenient or the location is closer to their home.

More mobility in the work force could also be a sign that employment benefits are not as important as they once were. With companies dropping health insurance and pensions largely a thing of the past, employee loyalty will continue to drop.

In a healthy economy, people are willing to quit their job because they are confident they can find a comparable position. With job leavers near 20-year highs, we have a signal that the economy is healthy, again in relative terms.

The current economy with slow growth, low wages and jobs with few benefits might be as good as it gets.

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