Quitters Never Prosper? In This Economy, Think Again

Written by Carrie Sheffield for Forbes

Here’s a positive trend for Americans, particularly low-income Americans: more people are feeling comfortable enough to quit their jobs.

When Janet Yellin begins as Federal Reserve chief next month, one of the key trends she’ll track is growth in the so-called “quit rate,” which she said last year “would signal that workers perceive that their chances to be rehired are good–in other words, that labor demand has strengthened.”

Data on quitters is part of the Job Openings and Labor Turnover (JOLTS) report issued by the Bureau of Labor Statistics (BLS). In recent months, things look better; although quitters haven’t reached pre-recession proportions, they are on the uptick.

The quitting rates are highest among leisure and retail workers, and that’s good for low-income folks, since according to the Bureau of Labor Statistics, the industry with the highest proportion of workers with hourly wages at or below the federal minimum wage is leisure and hospitality (around 19 percent). About half of all workers paid at or below the federal minimum wage work in leisure and hospitality, the vast majority in restaurants and other food services.

And in retail, according to the Aspen Institute, the national median hourly wage in the retail sector was $10.88, or 34 percent less than the national median of $16.57 for all workers. However, construction workers haven’t seen much improvement in their quit rate through the end of 2013, and their median hourly wage is nearly 14 percent lower than the national median.

National Public Radio’s Quoctrung Bui has a helpful chart showing quit rates visually by industry since 2005:

A caveat to temper enthusiasm for the positive news of better “quit rates” is the fact that labor force participation rates have not recovered to pre-recession levels. It could very well be that some of these workers are quitting the workforce altogether rather than finding work elsewhere. Yet we don’t know if this is true. Patrick Long, an Economist in the Office of Employment and Unemployment Statistics at BLS confirmed that JOLTS doesn’t track the subsequent movement of an employee who quits any particular job, it’s only tracking jobs left behind for any reason.

One big factor likely influencing labor force participation declines is an aging workforce, especially as Baby Boomers approach retirement. BLS doesn’t hold constant for age since it’s reflecting the actual population, and we know the median age of Americans is rising. Also, BLS is projecting labor force participation growth to decline over the next decade.

Quit rates vary by geography; Yankees have the fewest quitters. BLS doesn’t speculate, but it could be that workers in the Northeast are more satisfied with their jobs or there could also be less marketplace fluidity in that region. If you want go where the quitting’s good, head down South.

Here’s the BLS snapshot of seasonally-adjusted JOLTS data on regional quitting through last November (most recent data available):

All this being said, we’ve got less than 14 years of JOLTS data, and while it’s helpful that spans two recession recoveries, our knowledge of longer-term trends is limited. In the short run, we know right now this is a brightening spot, especially for lower-income folks. That’s something to keep in mind heading into tonight’s State of the Union Address, when President Obama is likely going to continue his messaging on the economic debate over inequality vs. opportunity.

Source: Forbes