For months, we have heard about workers quitting jobs and leaving the labor market in a supposed “Great Resignation,” which allegedly is hurting the economy. But that story is proving to be wrong. Although quit rates are high (especially for lower-wage workers), many are staying in the labor market and getting better jobs, in what White House economists are calling “the Great Upgrade.”
President Biden has been trying to get that message out. Earlier this month, he noted “There’s been a lot of press coverage about people quitting their jobs…Americans are moving to better jobs, with better pay, with better benefits…This isn’t about workers walking away and refusing to work. It’s about workers able to take a step up to provide for themselves and their families.”
The President was noting that unemployment had fallen below 4% for the first time since the pandemic started. And in talking about better jobs, he was drawing on analyses from economists at the Economic Policy Institute (EPI) and elsewhere.
EPI’s work shows that although there are indeed high quit rates, the data also show high rates of hiring, especially for lower-wage workers. In fact, hiring rates are above quit rates, meaning that many workers are moving to new jobs.
EPI economist Elise Gould emphasized that the media shouldn’t just focus on quits. She says, “what’s often missing from that coverage is that workers who are quitting their jobs aren’t dropping out of the labor force, they are quitting to take other jobs (her emphasis).”
To get at these dynamics, Gould and other economists use the Labor Department’s Job Openings and Labor Turnover (JOLTS) survey. A wide range of businesses and organizations report these data, including new jobs, quits, firings, and other key establishment data.
Gould’s analysis of November’s JOLTS data (the most recent we have) shows “hiring exceeds quits in all sectors” of the economy. Lower-paid sectors, especially food services and accommodation, did have historically high quit rates, but also historically high hiring rates. And industry hiring rates exceeded industry quit rates. (Lower-paid sectors generally have higher quit and hire rates, what labor economists call “churn,” due to low wages and poor working conditions.)
So there’s lots of churning. But overall there’s more hiring than quitting. And many of the new hires are coming from previous jobs.
But you wouldn’t know this from much of the media coverage. CNBC said the economy was undergoing a “quitting spree.” CBS News highlighted—“The Great Resignation: Why More Americans Are Quitting Their Jobs Than Ever Before.”
But other commentary puts high quit rates into perspective, specifically noting that not only are quit rates up, but so are hires. Labor analyst Jay Zagorsky estimates that around 33% of nonfarm workers quit at some point during 2021, but notes that 2019’s number was around 28%. So we are seeing a higher quit rate, but not one that is totally unique.
Remember what EPI’s Gould showed—“hiring exceeds quits in all sectors of the economy.” The “Great Resignation” label suggests workers leaving jobs are dropping out of the labor force altogether, but the vast majority of quits are people moving to new jobs. A restaurant owner interviewed by CBS said employees who quit “aren’t sitting at home. They found other careers, other opportunities that fit their lifestyle better.”
Derek Thompson of The Atlantic notes that while media coverage of the “Great Resignation” focuses on “white collar burnout,” quit rates haven’t gone up much in finance or real estate. Like other analysts, Thompson sees the quits data as “mostly about low-wage workers switching to better jobs in industries that are raising wages to grab new employees as fast as possible,” especially in hotels and food services.
So there’s not some mass exodus from the labor force. Rather, we’re seeing a high level of job switching, especially among workers in lower-paid sectors. The next time you hear about high quit rates, ask about hiring and people taking new jobs. You’ll probably find what President Biden highlighted—“Americans are moving to better jobs.” That’s not a “Great Resignation,” but a “Great Upgrade.” Let’s hope it continues.