Why the ‘Great Resignation’ may not last very long

A sign advertising job vacancies is seen as people walk into the store in New York City on August 6, 2021.

Eduardo Munoz | Reuters

Reports of the so-called Great Resignation may have been exaggerated.

In recent months, rapidly growing numbers of Americans have left their jobs – more than 4.4 million in September alone, the most recent month for which data is available.

Meanwhile, much of the narrative has focused on exhausted employees quitting their jobs – the ‘Big Quit’ as some have said, in which workers demand higher wages, better working conditions and more mobility.

While worker dissatisfaction is an obvious factor behind departures when they do occur, there has recently been more focus on how employers can find incentives to prevent workers from leaving.

However, the problem has been complicated and probably clouded by the pandemic.

Barclays economists have a different theory. They say the trend is less resignation than reluctance – concerns over factors related to Covid which, although they are on the rise as vaccines have spread and workers feel more confident about quitting their jobs again will likely subside in the days to come.

Many are still not in the workforce

What’s more, the same Labor Department data set that shows workers quitting in record numbers also shows hires growing at a steady pace – nearly 6.5 million in September, more than 2 million more than those who did. have resigned.

Although the pace of hiring has slowed down a bit since the summer, it is evolving to a level that would easily have been a record before the pandemic. At the same time, the layoff rate has remained constant for most of this year, which is reflected in weekly jobless claims which were recently within a range and closer to where they were before the pandemic.

This all adds up to a job market in which people leaving their jobs are motivated more by temporary Covid issues than by a general strike, as some have suggested.

“We believe this resignation dynamic is primarily a symptom of other underlying forces that affect labor market participation, rather than a cause,” wrote Barclays Deputy Chief Economist Jonathan Millar and ‘others in a long analysis.

“Indeed, the high quit rate is a red herring to understanding the slow return of workers to the U.S. job market following the COVID-19 pandemic, in our opinion,” Millar wrote. “Instead, the real cause is the reluctance of workers to return to the workforce, due to pandemic-related influences such as infection risks, infection-related illnesses and lack of affordable child care. “

So this paints a whole different picture than a Great Resignation in which disgruntled workers simply quit their jobs en masse.

Yet it is important to understand the issue of shrinking workforce and it upsets policymakers at the Federal Reserve and elsewhere.

The labor force participation rate, a measure of people working or looking for work relative to the total working-age population, is 61.6%, 1.7 percentage points below its previous level. the pandemic. This represents a drop of just under three million since February 2020.

Fed officials have said they will not start raising interest rates until the labor market moves closer to pre-pandemic levels, and seeing a normalization in the participation rate would be part of the process. this equation. The size of the labor force is around 1.4 million larger than at the start of 2021, but still not where policymakers would like.

Citing the Labor Department and other data, Barclays said the decline in labor force participation is fueled almost exclusively by married people living with a spouse who left the labor market at the end of the summer. 2020 and did not return to it.

“This general profile itself gives us reason to believe that many of the missing workers will gradually return to work,” the company said. “This is supported by survey data from other sources suggesting that COVID-related considerations – such as the risk of infection, disease, and income supports in the event of a pandemic – remain significant contributors to the continued reluctance to participate. “

Where are the dropouts

The figures also show an increasingly dynamic labor market.

About half of all dropouts this year are due to leisure and hospitality, an industry under intense pressure from the virus and associated restrictions and fears that limit meals and drinks.

However, about a fifth of those departures are also due to professional and business services, according to DataTrek Research. With many of these moves coming from the upper levels, including CEOs, the trend “is likely a positive sign for the job market,” DataTrek co-founder Jessica Rabe wrote in a recent report.

“The quit rate has traditionally been a measure of economic confidence, as workers usually voluntarily leave their current jobs after accepting a better offer,” Rabe added. “The churn rate in this industry along with the high overall level of quits is putting upward pressure on wages, which is useful from a consumer spending perspective in the context of strong headwinds on inflation. “

Indeed, wages have risen sharply in recent times, increasing 4.9% year-on-year in October. This is seen as growing evidence of an empowered workforce capable of securing higher wages.

However, there could be a dark side, as the difficulty in finding workers could force business owners to turn more to automation and exclude people from those jobs.

This is another reason why the dynamics behind the Great Resignation, as it is, could change quickly.

“Against this backdrop, we anticipate continued growth in role automation both to replace workers companies cannot find and to offset growing wage pressures,” Rabe wrote. “This will be an important trend to watch as it will shape labor markets in the long run as automation, once installed, is simply never reversed.”

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