The number of Americans voluntarily quitting their jobs again hit a record high in September while job openings stayed stubbornly above pre-pandemic levels, a sign that businesses may have to continue to raise wages in order to attract workers.
Since pandemic restrictions began to ease in April and the economy began to reopen, more and more people have felt comfortable leaving employment either to retire, retrain, or seek out better opportunities, either with improved working conditions or higher pay.
The trend was termed the “Great Resignation” by Professor Anthony Klotz, associate professor of Management at Mays Business School, Texas A&M University.
Since April the number of resignations has been between 3.3 million and 4.2 million per month. In September that rose by 164,000 to 4.4 million people leaving their jobs according to the Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report, released on Friday.
The quit rate is seen as a good measure of labour market confidence as workers leave when they are more secure in their ability to find a new job.
The report reflects an uneven economy, with strong demand grinding against labour and goods shortages, driving overall inflation to its biggest annual gain in 31 years – since the George HW Bush administration and the build-up to the Gulf War.
Data also shows that wage inflation shows few signs of abating even as the daily case rate of coronavirus infections ebbs, with employers in almost every industry competing to lure workers and 3m fewer people in the workforce compared to pre-pandemic levels.
The scramble for workers boosted wage growth to an annual increase to 4.9 per cent in October, although this has been outstripped by overall inflation, leading to a fall in real earnings.
“The continued surge in quits points to wage growth of between 4.5 per cent to 5 per cent, well above rates that would be consistent with inflation falling sustainably back towards the Fed’s 2 per cent target,” said Michael Pearce, senior US economist at Capital Economics in New York, following the report.
A separate survey by the University of Michigan, also released on Friday, showed consternation among consumers with sentiment on the economy falling to a decade low. Few believe the Biden administration is taking sufficient steps to tackle inflation.
“One-in-four consumers cited inflationary reductions in their living standards in November, with lower-income and older consumers voicing the greatest impact,” Richard Curtin, the survey’s director, said in a statement.
There is a “growing belief among consumers that no effective policies have yet been developed to reduce the damage from surging inflation”, he added.
The Federal Reserve has so far resisted calls to take stronger action to combat higher-than-expected inflation, arguing that it remains transitory even if it persists well into next year. The central bank announced at its last meeting that it will begin to taper its massive bond-buying program this month, seen as a precursor move to raising interest rates from their current level near zero. Investors currently expect a rate liftoff in mid-2022.
Job openings, a measure of labour demand, edged down by 191,000 to 10.4m on the last day of September. Hiring also remained largely unchanged at 6.5m in September. The number of job openings was little changed with vacancies increasing most in healthcare and social assistance, and state and local government, excluding education.
The government reported last Friday that nonfarm payrolls increased by 531,000 in October after posting gains of 312,000 in September. Job growth has averaged 582,000 per month this year.
Labour shortages could persist a while longer even as the Delta wave of Covid-19 infections slide from their mid-September high. All-time high savings fueled by government aid, as well as a strong stock market and record house price gains, look set to continue to provide a short-term buffer as workers weigh up when to re-enter the job market. Higher-than-normal early retirements are also playing a role.
There is hope that with infections declining and schools fully reopened for in-person learning, more people will rejoin the labour force soon, particularly as much of the government aid provided to survive the pandemic has now ended.
With reporting from Reuters