August 28, 2014
People Are Quitting Their Jobs. That’s Good News
Want to make Janet Yellen happy? Quit your job.
The Federal Reserve Board Chair watches a lot of economic data as she and her colleagues on the Federal Open Market Committee make their decisions about setting interest rates and winding down the current economic stimulus program. One of the data points that Yellen has said she pays attention to is the rate at which workers quit their jobs.
It may seem counterintuitive, but in the Fed’s view, it’s a good sign when an increasing number of people voluntarily leave their jobs. The thinking is that when jobs are scarce and people are worried about finding work, they are less willing to abandon an existing employment arrangement.
In the depths of the Great Recession, that seems to have held true. On Thursday, the Federal Reserve Bank of St. Louis’s venerable FRED Blog posted a graph illustrating the change in worker quit rates during the recession and recovery.
In the years before the recession, the monthly quits rate among non-farm laborers was consistently above 2 percent, but during the recession, it plunged to a 10-year low of 1.3 percent. Even after the recession officially ended, with job growth remaining slow, the quits rate remained low for years. However, in the past two years, the monthly quits rate has been edging slowly upward, hitting 1.8 percent in June.
Speaking at the annual Fed conference in Jackson Hole, Wyoming, last week, Yellen said, “The quits rate has tended to be pro-cyclical, since more workers voluntarily quit their jobs when they are more confident about their ability to find new ones and when firms are competing more actively for new hires. Indeed, the quits rate has picked up with improvements in the labor market over the past year, but it still remains somewhat depressed relative to its level before the recession.”
Yellen said that while the signs are encouraging, she remains unconvinced that the labor market has completed its recovery from the recession.
“[T]he balance of evidence leads me to conclude that weak aggregate demand has contributed significantly to the depressed levels of quits and hires during the recession and in the recovery.”
Translation: Things are improving, but Yellen still wants to see more people walking into the boss’s office and giving their notice.
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