The Great Resignation?

In recent weeks we have seen a rash of articles focused on the rise in workers quitting their jobs. As seen int the figure below, more than 4 million workers quit their jobs in both July and August. Why are so many people leaving their jobs? The explanations given range from burnout to a realization that there is more to life than work. These explanations may be true for some of the many workers who are leaving their current jobs, but the Great Resignation may be little more than the regular, though delayed, churn in the labor market.

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Many workers who would have normally sought a job change this past year delayed taking action. For those fortunate enough to have remained employed, holding onto a job provided some certainty in the face of the uncertainty during the pandemic.  A job change makes much more sense now than it did during the throes of the pandemic. While there has been a rise in quits in recent months, there has also been a rise in job openings, and in hires. The next figure shows that in August there were 10.4 million job openings and 6.3 million hires. The monthly count of job openings since February of this year have exceeded the previous high of 7.4 million that occurred in December of 2018. It is not surprising that workers have quit their jobs in recent months as the availability of alternative jobs has increased and as the economy has continued its recovery.

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Importantly, the recent record number of resignations does not imply that employment is falling. In fact, the employment-to-population ratio for people in their prime working years, at ages 25 to 54, has risen steadily since April of 2020, when it had fallen to 69.6%. The employment ratio in September 2021 stood at 78%. However, the September employment rate was still 2.4 percentage points below the pre-pandemic ratio of 80.4% in February 2020. For men ages 25-54, the September employment rate was 84.1%, or 2.3 percentage points below its February 2020 rate of 86.4%. For women in this age group, the September rate of 72% was 2.5 percentage points below the 74.5% from February 2020. The figure below explores the employment ratio in more detail by depicting the employment ratio from February 2020 and August 2021 for men and women at different ages.

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For both men and women, employment rates among those who are 25 to 34 are furthest from their pre-pandemic rates. The employment ratios at younger ages also took the greatest hits between February and April of 2020. Men’s employment ratio in September 2021 in this age group was 2.7 percentage points below the ratio in February 2020 and women’s was 3.2 percentage points lower. At higher ages, employment fell the least between February and April and the employment ratios in September were closer to the pre-pandemic ratios.
 
The recent news about the rise in workers resigning from their jobs should be placed in the context of the concurrent rise in job openings and the ongoing rise in employment ratios. Workers who have resigned in recent months likely waited to switch jobs until there was more certainty about the economy’s recovery. During the first 12 months of the pandemic, the number workers quitting their jobs fell as workers held onto known jobs and as job openings also fell. The recent rise in workers quitting their jobs comes at the same time as job openings have increased. Workers are also moving to new jobs in response to rising wages that are uneven across employers. Rather than a new phenomenon, the “Great Resignation” represents both a delayed response to normal job transitions combined with an increase in new opportunities.


 

Posted: November 04, 2021 by Dennis W. Jansen, Andrew J. Rettenmaier