Interest rates are rising, inflation is lingering at four-decade highs, the economy appears to be slowing and experts fear a recession is on the way. But Americans are still quitting their jobs at near-record rates in the face of growing economic uncertainty.
The percentage of American workers who quit their jobs set a record earlier this year and has only dropped slightly as the economy slows from two years of torrid growth. After reaching 2.9 percent this spring, the quits rate dropped to 2.7 percent in July, according to data released Tuesday by the Labor Department.
The idea of quitting a job amid a period of increased cost of living and a dubious economic future may seem counterintuitive. But the labor market has remained stacked in favor of workers, who see ample opportunities to boost their earnings to supplant increased costs from inflation.
“Despite recent declines, job openings still outnumber unemployed workers by a sizable margin, illustrating just how tight the labor market remains,” wrote AnnElizabeth Konkel, an economist at Indeed Hiring Lab, in a Monday analysis.
There were roughly two open jobs for every unemployed American, according to Labor Department data, giving job seekers ample opportunities to find new jobs with better pay or working conditions. Businesses are still scrambling to find enough workers to keep up with consumer spending — which is well above pre-pandemic levels — from a workforce that remains smaller than it was before COVID-19.
“It seems possible that employer demand would need to cool significantly more before recruiters start to notice an easing in recruiting conditions,” Konkel wrote.
In other words, employers still have too many open jobs and not enough candidates to avoid boosting wages and other perks to find talent. And that means workers still have ample incentive to quit for a better-paying job, particularly with inflation still high.
Job seekers on Indeed.com are looking for ever-higher wages, Konkel explained. The number of Indeed users seeking jobs with a $20 per hour wage rose above those seeking $15 per hour in June 2022, and the number of jobseekers looking for $25 per hour is up 122 percent over the past 12 months.
Konkel attributed the spike in job seekers looking for more money to the steady increase in advertised wages and the inflation they’ve helped to feed.
“Once job seekers know it’s possible to attain a higher wage, their expectations may shift and act as a pull factor in searching for a higher dollar amount. In this case, the shift in job seeker expectations from searching for $15 to instead $20 is clear,” Konkel explained.
“On the flip side, inflation continues to take a bite out of workers’ paychecks,” she continued, noting that only 46 percent of workers saw wage gains that outpaced inflation.
The pressure to quit for a higher paying job has been highest in the private sector, where 3.5 percent of the workforce left their current employer in July. Workers in industries with historically low wages, tough working conditions and limited teleworking options have led the charge.
The leisure and hospitality sector posted a whopping 6.1 percent quit rate in July, down sharply from 6.9 percent a year ago but still nearly twice the national quit rate.
Restaurants and bars in particular have struggled to return to pre-pandemic employment levels despite rapidly raising wages. The pressure has also made it nearly impossible for those businesses to fire or lay off employees, even amid usual season turnover.
“Hospitality companies tell us that what was once a ‘one strike, you’re out’ rule for employees who failed to show up at work without notice is now more like a ‘ten strikes, you’re out’ rule. They cannot afford to fire workers because they cannot afford to replace them,” said Julia Pollak, chief economist at ZipRecruiter.
“The decline in terminations in industries like hospitality have been so large, they have more than offset the increase in layoffs in the tech sector,” she explained.
Quits have also remained high in retail (4 percent) and the transportation and warehousing sectors (3.5 percent), with both industries facing threats from a decline in goods spending and rising interest rates.
Even so, there are some signs of waning worker confidence, which may lead to a decline in quits.
ZipRecruiter’s job seeker confidence index dropped 4.5 points in August to an all-time low of 97.8, Pollak said, with a greater number of applicants looking for job security over higher wages.
“Since the pandemic, job seekers have been looking for higher pay, less stress, and greater flexibility. In August however, job security rose to the second-place spot in their priority ranking,” Pollak explained.
“One in four employed job seekers say they feel less secure about their current job than they did six months ago. Rising risk of a recession, paired with a wave of recent tech layoffs, has made employees more concerned about the precarity of their jobs.”