U.S. Markets closed

More Americans Quitting Jobs, But Labor Churn Remains Slow

More Americans are quitters. And that's a good thing, at least when they leave their jobs for better opportunities, economists say.

But fewer people are quitting than they were before the recession. That reflects and contributes to the sluggish labor market.

Some 1.7% of workers quit in August, according to the Labor Department's JOLTS survey out Thursday. That's 2.36 million workers, the most in five years.

"As more people leave voluntarily, presumably many of them are doing so for something better, and that's all to the good," said Lawrence White, an economics professor at New York University's Stern School of Business. "It suggests they not only see opportunity but are feeling optimistic enough about their opportunities to leave the security of their current job.

Trouble is, White said, the quit rate is only creeping to the upside. Before the recession, nearly 3 million Americans voluntarily left every month.

The lack of labor market churn is widespread. Layoff activity has been below pre-recession levels for quite some time. Companies aren't cutting jobs, but they aren't hiring much either.

Gross hiring — before voluntary and involuntary job leavers — was 4.48 million in August. That's off recession lows but far below the 5-million-plus common during the prior economic expansion, which itself wasn't known for rapid job growth.

A lack of job creation discourages workers from leaving their old positions. That in turn makes employers less willing to fill open positions.

That helps to explain why the jobless rate still tops 7%, economists say, even with the expansion well into its fifth year.

"Things are a little better, but certainly we have not hit a point of any velocity," said Craig Dismuke, chief economic strategist at Vining Sparks. "It's almost like there's a glass ceiling on the economy.

He noted that September's headline job growth — a modest 148,000 — accounts for all jobs added minus those eliminated. The still-low quit rate and unusually few layoffs suggests employers are not that eager to fill open positions, pointing to a continued slow recovery.

Wage, Productivity Impact

That, Dismuke said, is problematic for several reasons.

When more people stay in their jobs for prolonged stretches, he said, it means fewer opportunities for younger Americans looking to join the full-time labor force. It also makes it particularly difficult for those who have been unemployed for long stretches to find work because, with so few openings, they are competing against a large crop of already-employed candidates. And those already employed, economists say, tend to be viewed more favorably because their skills and training are more likely to be up to date.

And, Dismuke said, little voluntary turnover likely means slower overall wage growth, as moving from one job to another has traditionally been "one of the most effective ways" to earn more because people typically leave for higher paying opportunities. When people move to jobs for which they are good matches, those positions tend to get done more efficiently, boosting productivity.

"But not enough people are confident about there being good jobs out there, so many of them are staying put," Dismuke said.

Housing May Help

There are signs of life. Jobs creation has been steady, if modest. Housing, too, is on the mend, with double-digit home price gains in 20 major markets in July, according to Case-Shiller. Home builders expect appreciation to continue — at a slower pace — despite higher mortgage rates.

As prices climb, homeowners gain equity and can sell their properties for profits, making it easier for them to move. About 7.1 million Americans moved across state lines last year, according to the Census Bureau, up from the 2010 low of 6.7 million.

"People for some time just could not just sell their homes and move for jobs; they couldn't afford to," White said. "But we now have indicators that maybe we are finally getting past that difficult part of things.

Atlanta Federal Reserve President Dennis Lockhart recently said that greater voluntary turnover and higher mobility levels are important, but he cautioned against any grand expectations.

Even before the last recession, voluntary turnover was declining, he noted. This was due in part to more two-income households — when two earners need new jobs to move, mobility inevitably declines — and an aging population. And new business formation has been weak, minimizing opportunity.

"The rate of new business formation took an especially large hit during the last recession and has been slow to recover," Lockhart said, noting reduced access to start-up financing and tighter credit. "There has been a general atmosphere of uncertainty in the wake of the financial crisis and recession."